SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10-KSB
                          (Mark One)(X) Annual Report
 Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the
                      fiscal year ended December 31, 2000

     ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 For the transition period from ______________ to
                                _______________

                         Commission File Number 0-11883
                                 Telebyte, Inc.
               (Exact name of issuer as specified in its charter)
                              Delaware 11-2510138

        (State or other jurisdiction of (I.R.S. Employer incorporation )

         Identification No.)270 Pulaski Road, Greenlawn, New York 11740
                    (Address of principal executive offices)

         Issuer's telephone number, including area code (631) 423-3232

   Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                    Common Stock, par value $0.01 per share
                                (Title of class)

   Checkwhether the registrant (1) filed all reports required to be filed by
   Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
                 12 months (or for such shorter period that the
 registrant was required to file such reports) and (2) has been subject to such
                    filing requirements for the past 90 days.
                               __X__ Yes _____ No

      Check if there is no disclosure of delinquent filers in response to
  Item 405 of Regulation S-B contained in this form, and no disclosure will be
    contained, to the best of registrant's knowledge, in definitive proxy or
            information statements incorporated by reference in Part
        III of this Form 10-KSB or any amendment to this Form 10-KSB. (X)

     The issuer's revenues for its most recent fiscal year were $6,464,528

  Theaggregate market value of the voting and non-voting common equity held by
        non-affiliates of the registrant at March 20, 2001 was $1,873,928

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

The number of shares of common stock outstanding at March 20, 2001 was 1,253,631
 Transitional Small Business Disclosure Format (check one): Yes _____; No __X__

                   DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>

FORWARD  LOOKING   STATEMENTSCautionary   Statements  Regarding  Forward-Looking
Statements.  Statements  in this Annual Report on Form 10-KSB under the captions
"Description  of Business,"  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations,"  "Risk Factors" and elsewhere in this Form
10-KSB,  as well as statements  made in press releases and oral  statements that
may be made by the Company or by officers, directors or employees of the Company
acting on the Company's  behalf,  that are not  statements  of historical  fact,
constitute  "forward-looking  statements"  within  the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995.  Such  forward-looking  statements
involve  known and unknown  risks,  uncertainties  and other  factors that could
cause the actual  results of the  Company to be  materially  different  from the
historical  results  or from any  future  results  expressed  or implied by such
forward-looking  statements. In addition to statements which explicitly describe
such risks and uncertainties,  readers are urged to consider  statements labeled
with the terms  'believes,'  'belief,'  "expects,"  "plans,"  "anticipates,"  or
"intends," to be uncertain and forward-looking.  All cautionary  statements made
in  this  Form  10-KSB  should  be  read  as  being  applicable  to all  related
forward-looking statements wherever they appear.


PART 1

Item 1.    Description of Business Introduction

Telebyte, Inc., formerly known as Telebyte Technology, Inc.  (herein either the
"Company" or "Telebyte") was formed as a New York corporation in August 1983,
re-incorporated in Nevada in 1987, and re-incorporated in Delaware in 1999.  The
Company changed its name to Telebyte, Inc. in 1999.  The Company's headquarters
are located in Greenlawn, New York

The Company is focused in two separate business segments.

The first  segment is  Telebyte,  Inc,  which is a  manufacturer  of  technology
products.   This  business  segment  carries  out  its  activities  through  two
divisions,  Datacom and Broadband.  The Datacom  division is focused on premises
and local area data  communications  products used with both twisted pair copper
cable and fiber  optic  cable  transmission  media.  The  Broadband  division is
focused on test  equipment  products to be used in the  development of signaling
devices for technologies achieving broadband access to the Internet.


The second segment is DeliverNextday.com, Inc. d/b/a Nextday.com (Nextday.com) a
wholly owned  subsidiary of Telebyte which  concentrates  on reselling  products
manufactured by other companies over the Internet.  Nextday.com's operations are
carried out in Greenlawn,  New York.  Nextday.com  has formed an alliance with a
third party  fulfillment  company for the  warehousing  and  distribution of its
products.  Nextday.com does not conduct any foreign operations.  Nextday.com was
incorporated in New York in 1999.


<PAGE>



Business Developments for  1999 and 2000

During January 1999, the Company concluded  negotiations with Joel A. Kramer for
the purchase of his equity interest in the Company.  Effective January 20, 1999,
Joel A. Kramer,  then the Chairman of the Board,  President and Chief  Executive
Officer of Telebyte resigned these positions. In addition, the Company purchased
all of the shares of common  stock of the  Company  owned by Mr.  Kramer and Mr.
Kramer agreed to cancel options to purchase 10,000 shares of common stock of the
Company for an aggregate  consideration  of $1,075,190 of which $867,510 was for
such shares,  $17,680 was for the  cancellation of such options and $190,000 was
in exchange for Mr. Kramer's restrictive covenant.
In addition,  Mr.  Kramer agreed not to compete with the business of the Company
until  January 19, 2003 and released the Company from certain  potential  claims
relative  to his  previous  employment.  The  Company  also  transferred  a life
insurance policy to Mr. Kramer,  previously  maintained for Mr. Kramer's benefit
and having a cash value of approximately $80,000.  However, it was intended that
Mr. Kramer serve as a consultant to the Company  through January 19, 2002 for an
aggregate consideration of $165,000 plus reimbursement for certain expenses. See
"Certain Relationships and Related Transactions."

With the departure of Mr. Kramer,  Company leadership  transferred to a new team
consisting of Dr. Kenneth S. Schneider,  a founder, as Chairman and CEO, and Mr.
Michael  Breneisen as President and COO. During 1999, the Company went through a
major internal  reorganization  resulting in greater efficiencies in operations.
This  included  restructuring  the Sales and  Marketing  Dept.  and carrying out
customer technical support from the Engineering Dept.

In 1999, the Company formed Nextday.com as a wholly owned subsidiary in order to
focus  on  the  business-to-business  e-commerce  marketplace.  Nextday.com  was
launched in the fourth quarter of 1999 with Michael  Breneisen as its CEO.During
2000,  Management  developed a detailed  three-year  strategic plan. The primary
goal of  which  is the  initiation  of  activities  designed  to  assist  in the
long-term  growth of the Company.  In  particular,  an aggressive and structured
research and development  program has been  implemented for both the Datacom and
Broadband divisions.

In order to realize the goals of the strategic plan, management restructured the
product  business  of  Telebyte  into two (2)  separate  divisions:  Datacom and
Broadband.  The  Datacom  division  is focused on  premises  and local area data
communications products used with both twisted pair copper cable and fiber optic
cable  transmission  media. The Broadband  division is focused on test equipment
products to be used in the  development  of signaling  devices for  technologies
achieving  broadband  access  to the  Internet.  Each  of  these  divisions  has
dedicated  engineering  (product  development),  sales and marketing  resources.
However,  the  divisions  also make common use of Telebyte's  Manufacturing  and
Administration departments.  The Company recruited the former General Manager of
Consultronics  Inc. to manage sales and marketing  for the  Broadband  division.
Consultronics Inc. had been the Company's  principal  competitor in this product
area. To enhance sales and  marketing of the Broadband  division,  an office was
opened in Duluth, Georgia.

The  activities  of  the  Company's  e-commerce  subsidiary,   Nextday.com  were
significantly  impacted when its Applications Service Provider ("ASP") announced
the cessation of its business in 2000. This was a major setback in the growth of
Nextday.com  and as a result the Company  decided not to rely on the services of
an ASP for future  operations.  Instead,  the Company  decided to obtain and own
required  hardware and software for both  Nextday.com and Telebyte.  This became
part of an overall  approach "to e-business  enable" the Company as a whole on a
common  platform.  The Company  expects to have Telebyte and Nextday on this new
platform beginning in 2001.

<PAGE>



Products Datacom Division

Within the data  communications  business  area,  the Company has four principal
product  groups:  interface  converters,  short haul modems,  LAN products,  and
surge/lightning protectors.


Interface  Converters  transform the characteristics of the electrical interface
of one data terminal or communication  device to enable it to be compatible with
the  electrical   interface  of  another.   This  allows  different  devices  to
communicate.  The  conversion  may include  modifying  the  protocol  and/or the
physical  transmission  medium.  By  employing  interface  converters,   a  data
communications  network  can be  established  or  expanded  using  heterogeneous
equipment types. Without the use of interface  converters,  such equipment would
be unable to communicate.  Because the data communications industry continues to
develop new interface  standards,  the Company  anticipates  that the market may
require new varieties of interface converters. We anticipate an expansion of the
market for existing products and the creation of opportunities for new products.
Customers for these products include system and network integrators.  Telebyte's
line of interface  converters  is available  in most of the  configurations  now
required by the market and includes programmable devices.

Short Haul Modems  (alternatively  referred to as either line drivers or limited
distance modems) are  communications  signaling devices used to implement a data
communications  link  over the  short  distances  of the  premises  environment.
Customers  for these  products  include  system  and  network  integrators.  The
premises environment is that of the office building, campus, industrial or other
sites.  Data  communication  distances here vary from a few feet to a few miles.
Short haul modems are used to connect computers with accessory equipment such as
terminals, printers, badge readers, scales, bar code readers, and other computer
controlled  machines.  Short  haul  modems  are also used in  establishing  data
communications  between  personal  computers  and mini  computers  or  mainframe
computers.  In some cases,  short haul modems can be used to signal on telephone
company (Telco) lines used for special services such as Internet  access.  Short
haul modems are often confused with "dial-up"  modems used for wide area network
and/or Internet communications.

LAN  Products  support  Local  Area  Network  ("LAN")   computer   communication
connectivity in the office building,  campus or  manufacturing  environment when
such connectivity follows the Ethernet standard.

Surge/Lightning  Protectors prevent computers,  modems, and computer peripherals
from damage  caused by voltage and current  surges.  Such surges may result from
lightning or other electronic disturbances.


Broadband Division

Within the broadband test equipment business area the Company's products have
principally  consisted of Digital  Subscriber  Line "DSL" Wire Line  Simulators.
These simulators are used in engineering  design,  performance  verification and
production testing of DSL modems and Digital Subscriber Line Access Multiplexers
"DSLAMs".   These  products  are  used  by  design  and  development  engineers,
laboratory test and verification engineers and production test engineers.  These
simulators are used by companies that  manufacture  DSL modems and DSLAMs.  They
are used by  companies,  which  purchase DSL modems and DLAMs.  They are used by
companies that  manufacture  the  semiconductor  chips used to  manufacture  DSL
modems and DSLAMs.

The DSL modems are used as Customer  Premises  Equipment  "CPE." They enable the
user, the customer,  at either  residence or business to connect to the Internet
by the broadband,  high speed,  DSL service.  The DSLAMs are used at a Telephone
Company  (Telco)  Central  Office  "CO." They are the TELCO  termination  of the
customer's DSL line.

<PAGE>
With one exception,  the DSL Wire Line Simulators  simulate
the amplitude and delay of the local loop (twisted pair of cable) extending from
the CO to the CPE. These products differ in the loop lengths and bandwidths that
they can accurately represent.  The single exception is a product that simulates
the various noise and interference impairments present on the local loop.

Manufacturing

The Company generally  manufactures and maintains an inventory of products based
upon historical  levels of demand and sales forecasts.  Most of its products are
standard or catalog items.  On occasion,  the Company  produces  custom products
manufactured to a customer's specifications or for a specific application.

The  Company  experienced  shortages  of  certain  components  during  2000.  In
particular,  sales of the  Broadband  division  were  adversely  affected by the
worldwide shortage of capacitors during 2000.

The Company does not depend upon any particular  source of supply,  and not more
than 10% of purchases were from a single supplier.



Research and Development

The research and new product development budget for 2001 is $700,000 compared to
approximately  $537,000 spent in 2000.  The cost of research and  development is
not borne  directly by the Company's  customers.  Government  RegulationFederal,
state and local  environmental  laws and regulations  have no material impact on
Telebyte or its business. The Company is subject to the governmental regulations
that apply to businesses generally.

Sales and Marketing

Datacom Division

Activities within the Datacom division are performed by a Company employed sales
staff under the management of the Director of Datacom Sales. Customer contact is
maintained by telephone, fax and e-mail. Domestic sales in the United States are
most  often  made  directly  to  the  end-user.  End  users  include  engineers,
technicians and network integrators.  However,  there are some sales carried out
through distributors.  Sales outside the United States are primarily carried out
through  distributors  although  such  distributors  are not  given  countrywide
exclusivity.

Marketing  activities  in this  division  are focused on and around the Internet
using the web site  www.telebyteusa.com.  This web site includes various content
for  all  of  Telebyte's  datacom  products   including  product   descriptions,
specifications, application notes, and product manuals. Attracting an increasing
number of  customers  to this web site is a high  priority  of the  Company.  To
realize this end, the Company  conducts search engine  optimization  activities.
Specifically,  the Company designs its web site pages to increase the likelihood
that they will be ranked high by the major Internet search engines.  Such search
engine  optimization  increases the  likelihood  that  customers for  Telebyte's
datacom  products may find the Company's  products on the Internet  before other
sources.

<PAGE>

Other  marketing  activities  in this division make use of a Telebyte full color
catalog.  However,  distribution of this catalog is principally to customers and
prospects in the Company's database. This division also makes use of new product
press releases.

Broadband Division

Activities  within the  Broadband  division are  performed by a staff of Company
employed  field sales  managers and sales  engineers  under the direction of the
Vice President and Chief Marketing Officer (CMO) of broadband products. Customer
contact is maintained by personal  visit,  telephone,  fax and e-mail.  Domestic
sales in North America are strictly  direct to the end-user.  At present,  sales
outside North America are principally through distributors,  which in most cases
are given countrywide exclusivity.  At present, outside North America, there are
no sales to any particular country, which are exceptional.

Marketing   activities  in  this  division  rely  heavily  upon  attendance  and
participation  in trade shows focused on broadband  products.  These include the
DSLcon and International Engineering Consortium.

Other  marketing  activities in this division have and will continue to make use
of product brochures,  new product press releases and other marketing collateral
material.

The Company makes a significant effort to participate in Industry  organizations
and standards bodies such as DSL Forum, ANSI subcommittee  T1E1.4, TIA's TR-30.3
and the ADSL  Consortium  Interoperability  Laboratory at the  University of New
Hampshire.  It is  believed  that such  participation  may bring the  division's
products greater exposure.


Competition

Datacom Division

There are a significant number of companies engaged in manufacturing and selling
data  communications  equipment  in  the  same  markets  as the  Company's  data
communications business segment. Since Telebyte's product line is diverse, it is
difficult to define and enumerate  this  competition.  Several  competitors  are
larger  and more  established  than  Telebyte.  Such  competitors  have  greater
technical, capital, sales, marketing and other resources than does the Company.

The Company's principal competitors are RAD Data Communications,  Ltd. (which is
based in Israel with local offices in New Jersey),  Black Box (with headquarters
based  in  Pennsylvania),   Patton  Electronics  (based  in  Maryland),  B  &  B
Electronics  (based in Illinois),  Dataforth  (based in Arizona) and a number of
smaller  companies.  Telebyte  competes  with  these  companies  on the basis of
availability,  price,  quality,  breadth  of  product  line,  technical  support
innovation and its  willingness to accommodate  requests for  modifications  and
customization.

Of these factors,  the Company  relies  principally  upon the  price/performance
ratio of its many products.  However, Telebyte also attracts market share by its
ability to fill orders quickly and provide  technical  support to its customers.
Historically,  the Company has not relied upon patents, registered trademarks or
licenses  to give it a  competitive  advantage.  The  Company  does not have any
patents or copyrights. The Company has one trademark, 'Telebyte.'

<PAGE>

Broadband Division
Telebyte is fortunate in having had and still having only one principal
competitor,Spirent LLC, a British test  equipment  company.  Until 1999, the
competitor was Consultronics  Limited with  headquarters in Concord,  Ontario
Canada.  In 1999,Consultronics  sold its local loop simulator  line to Spirent,
which placed the Consultronics products in its Communications group as the DLS
Division.  Spirent has an estimated 85% share of the loop simulator market.

Employees
As of December 31, 2000, the Company had 46 employees. None of the employees are
represented by a labor union and the Company considers its employee relations to
be good. The Company also uses subcontractors to support its current operations.


Backlog
At December 31,  2000,  the  Company's  backlog was  $693,306,  all of which the
Company expects to fill in fiscal 2001.  Comparable backlog at December 31, 1999
was $200,669.

Item 2.     Description of Property

Telebyte's executive office, plant, and manufacturing  facility are located in a
20,000 square foot building on 3.2 acres,  at 270 Pulaski Road,  Greenlawn,  New
York 11740.  The Company  purchased the land and building in September 1985. The
Company  refinanced  the existing  mortgage in March 1998,  and the property now
secures a mortgage loan payable on a fully  self-amortizing basis over 10 years.
Under the Mortgage Modification  Agreement,  interest is payable at 9.3% through
June 1, 2003. At that time and every three years  thereafter,  the interest rate
will be adjusted to the three-year  weekly average US Treasury Constant Maturity
Rate plus 3%. The  outstanding  principal  balance of the mortgage  loan,  as of
December 31, 2000, was $795,378. Management believes that all of its properties,
plant,  and equipment  are well  maintained  and adequate for its  requirements.
Management believes that the property is adequately covered by insurance.

Of the 20,000  square  feet,  the  Company  has leased  5,300  square feet to an
unaffiliated tenant.  Management believes that Telebyte's existing manufacturing
facilities are sufficient to support its present needs and  anticipated  growth,
and the Company does not foresee any significant  capital expansion of its plant
in Greenlawn for the next three years.

The Company  leases 2,167 square feet of office space in Duluth,  Georgia  where
the Broadband  Division  staffs its sales and marketing  personnel.  The Company
signed a three-year lease, which expires on October 31, 2003.


Item 3.   Legal Proceedings

Not applicable.

Item 4.             Submission of Matters to a Vote of Security Holders

Not applicable.


<PAGE>

PART II

Item 5.   Market for the Company's Common Equity and Related Stockholder Matters

The
Company's  common stock is traded in the over the counter  bulletin  board under
the symbol "TBTI."

The following  table sets forth the high and low bid prices for the common stock
for each fiscal  quarter  during 2000 and 1999 as reported by NASDAQ Trading and
Market  Services.  The bid and ask prices for the common stock on March 20, 2001
were $2 and $2.3125 respectively.


                           2000                                 1999

                  High               Low               High               Low
-----------  ----------------- ----------------- ------------------ ------------
1st Quarter     $13.50              $2.75             $2.625             $1.031
2nd Quarter       4.00               2.00              2.25               1.00
3rd Quarter       3.50               2.25              1.688              0.875
4th Quarter       3.25               1.187             3.813              1.25



The above quotations  reflect  inter-dealer  prices,  and may not include retail
mark-up,  mark-down or  commissions  and may not  necessarily  represent  actual
transactions.

At March  20,  2001,  there  were  approximately  221  holders  of record of the
Company's  common  stock.  Most of the  shares of the  common  stock are held in
street name for a larger number of beneficial owners.

To date,  Telebyte has not paid a cash  dividend.  The payment and amount of any
future  dividends  will  necessarily   depend  upon  conditions  then  existing,
including  the  Company's  earnings,   financial   condition,   working  capital
requirements,  and other  factors.  The Company does not  anticipate  paying any
dividends in the foreseeable future. The Company has no agreements that prohibit
the payment of dividends by the Company.



<PAGE>

Item 6.    Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operations

Fiscal 2000 Compared to Fiscal 1999

Sales for the year ended  December 31, 2000  increased by $686,140 to $6,464,528
compared to $5,778,388  for 1999.  This increase in sales is due primarily to an
increase of the Company's  broadband  product line.  Aggressive  sales  activity
resulted in increased orders for the broadband product line offerings in 2000.

With  respect to the sales in each of the  Company's  two  divisions  comparison
results  are as  follows.  For the  Datacom  division;  the  sale  of  interface
converters  represented 43.9% of Telebyte's revenue in 2000 as compared to 52.2%
in 1999, the sale of short haul modems represented 21.7% of Telebyte's net sales
in 2000 as compared to 25.2% in 1999, the sale of LAN products  represented 5.5%
of  Telebyte's  net sales in 2000 as  compared  with  7.3% in 1999,  the sale of
Surge/Lightning  Protectors  represented 5.5% of Telebyte's net sales in 2000 as
compared with 4.1% in 1999. For the Broadband  division Broadband test equipment
represented 16.8% of Telebyte's net sales in 2000 as compared with 5.3% in 1999.

The gross profit for 2000 was 51.2% as compared to 52.4% for 1999.   This was
primarily a function of product mix.

Selling,  general,  and administrative costs increased by $229,275 to $1,969,518
in 2000,  compared to $1,740,243 in 1999.  The increase was due primarily to the
startup costs  associated  with new  facilities  for the  Broadband  division in
Duluth, Georgia and salary increases to existing personnel.


Research and development expenses increased  marginally in 2000 to $537,236,  or
8.3% of sales, from $518,096, or 9.0% of sales. Product development was directed
at the  continued  enhancement  of both  the  Company's  Broadband  and  Datacom
products.  The Company  completed  the  development  of a  multi-line  wire line
simulator,  the Model 458,  which can simulate up to 16 local loops up to 20,500
feet each. The Company began shipping the model 458 during the fourth quarter of
2000.


Interest  expense,  of $95,202 in 2000 decreased to 1.5% of sales as compared to
$111,738,  or 1.9% of sales in 1999.  This  decrease  was due to  reductions  in
outstanding  debt  during  2000.  Interest  expense  is  primarily  incurred  in
connection with the mortgage note payable.

Interest  income of $31,649 in 2000  increased  compared to $7,674 in 1999.  The
increase in 2000 was due to higher  average  levels of cash on hand during 2000.
In 2000,  the  Company had rental  income of  $48,195,  equal to the 1999 rental
income. Rental income is derived from the tenant in the Greenlawn,  NY facility.
For 2001, the Company expects rental income of approximately $48,000.

The Company generated net income of $503,922 or $0.32 diluted per share and 7.8%
of sales,  compared to $423,305 or $0.31  diluted per share,  and 7.3% of sales,
for 1999.  The  increase  is  primarily  attributable  to the  increase in sales
revenues.

The effective tax rate in 2000 was 36.0%, compared with 40.8% in 1999.   The
Company expects its effective tax rate for 2001 to beapproximately 40%.

<PAGE>

Liquidity and Capital Resources

In 2000,  the Company  invested  $214,326 in property and  equipment,  which was
financed through  internally  generated funds. The Company generated $678,268 of
cash flow from  operations in 2000,  compared to $586,536 in 1999.  The increase
was principally due to increased sales in 2000 as compared to 1999.

Working  capital  increased  at December  31,  2000 by  $224,936  to  $2,491,893
compared with  $2,266,957 at December 31, 1999. The increase was principally due
to increased  sales in 2000 as compared to 1999. The current ratio  increased to
4.5 to 1 at December 31, 2000, compared to 4.4 to 1 at December 31, 1999.

The  Company  has an  agreement  with a financial  institution,  Merrill  Lynch,
expiring  April 30,  2001,  which  provides  the  Company  with a line of credit
facility of up to $500,000 based on eligible  accounts  receivable and purchased
components  and  materials and finished  goods  inventories  of the Company,  as
defined in the agreement.  Further,  the agreement  contains  certain  financial
covenants  which require the Company to maintain a minimum level of tangible net
worth  and  places  limitations  on the  ratio of the  Company's  total  debt to
Company's tangible net worth, as defined in the agreement.  Borrowings under the
line of credit  bear  interest  at the  bank's  specified  prime  rate plus .75%
(10.25% at December 31, 2000).  There was no  outstanding  balance  against this
line at December 31, 2000.

In January 1999, the Company  secured an additional  Reducing  Revolving Line of
Credit from Merrill Lynch, which provides for initial borrowings up to a maximum
of $1,000,000.  Availability under the Reducing Revolving Line of Credit will be
reduced  monthly  by  approximately   $11,900  and  will  expire  January  2006.
Availability  under this line at December 31, 2000 was  approximately  $726,000.
Borrowings  under this loan  agreement  bear  interest at the 30-Day  Commercial
Paper Rate plus 2.90%.  (9.45% at December 31, 2000).  There was no  outstanding
balance against this line at December 31, 2000.

The Company  believes that cash generated by the Company's  operations,  current
cash and  cash  equivalents,  and the  line of  credit  should  supply  the cash
resources  to meet  its  cash  needs  for the  next  twelve  months.  Effect  of
InflationDuring  the five-year  period ended  December 31, 2000, the Company was
able to decrease its costs of sales of its products to compensate for the effect
of  inflation  on the  cost  of  components  due in  large  part to  changes  in
manufacturing methodology, namely, increasing the amount of product manufactured
on a sub-contractor basis.

<PAGE>

Risk Factors

WE HAVE A LIMITED OPERATING HISTORY WITH RESPECT TO THE INTERNET,  AND WE EXPECT
TO ENCOUNTER RISKS FREQUENTLY FACED BY EARLY-STAGE  COMPANIES IN NEW AND RAPIDLY
EVOLVING MARKETS.

      We incorporated our company in 1983 and launched  Telebyteusa.com in 1995.
We formed  Nextday.com,  Inc. as a wholly owned subsidiary in 1999, and launched
its Web site, Nextday.com,  that same year. Accordingly, the Internet segment of
our business has a limited  operating  history upon which you can evaluate  that
portion of our business. In order to be successful, we must attract more traffic
to  Telebyteusa.com  and  Nextday.com,   and  generate  significant   e-commerce
revenues.  However, as a relatively recent entrant in a new and rapidly evolving
market like the Internet,  we face  numerous  risks and  uncertainties.  Some of
these risks and uncertainties relate to our ability to:

      - develop further Telebyteusa.com and Nextday.com awareness and brand
        loyalty;

      - attract a larger audience to, and increase frequency of use of, our
        Telebyteusa.com and Nextday.com Web sites;

      - increase customer acceptance of the online purchase of products through
         our sites;

      - generate increased e-commerce revenues through our Web site from
         consumers and other commercial vendors;

      - anticipate and adapt to the changing market for Internet services and
        e-commerce;

      - respond to actions taken by our competitors;

      - manage our growth effectively;

      - implement our advertising and marketing strategies;

      - develop and renew strategic relationships, particularly with suppliers;

      - attract, retain and motivate qualified personnel; and

      - continue  to upgrade  and  enhance  our  technologies  and  services  to
        accommodate expanded service offerings and increased consumer traffic.

      We may not be successful in accomplishing  any or all of these objectives,
        and we cannot be certain that we will be able to maintain  our current
         level of revenues from our present operations.



WE  EXPECT  LOSSES  FROM  OPERATIONS,  AND  OUR  FUTURE  PROFITABILITY  OF  SUCH
OPERATIONS REMAINS UNCERTAIN.



<PAGE>


    Our ability to generate significant revenue from our Web sites is uncertain.
We have incurred and will incur substantial costs to create,  launch and enhance
Telebyteusa.com  and  Nextday.com,  to  build  brand  awareness  and to grow our
business.  We expect  losses from  operations  and negative  cash flows from our
Internet  business  for  the  foreseeable   future  because  we  plan  to  incur
significant  expenses  as we expand  our  advertising  and  marketing  programs,
continue  to develop  and extend the  Telebyteusa.com  and  Nextday.com  brands,
expand our infrastructure and data collection capabilities,  and seek to acquire
complementary  businesses and technologies.  If our revenues do not increase and
if our  spending  levels  are not  adjusted  accordingly,  we may  not  generate
sufficient  revenues to achieve  profitability  of this  segment.  Even if we do
achieve  profitability,  we may  not  sustain  or  increase  profitability  on a
quarterly or annual basis in the future.

THE LOSS OF THE  SERVICES  OF OUR KEY  PERSONNEL,  OR OUR  FAILURE  TO  ATTRACT,
ASSIMILATE  AND RETAIN OTHER  HIGHLY  QUALIFIED  PERSONNEL IN THE FUTURE,  COULD
SERIOUSLY HARM OUR BUSINESS.

      Our future  success  depends,  in part, on the  continued  services of our
senior management.  Our future success also depends on our ability to retain and
motivate  our key  employees.  The loss of the  services of our Chief  Executive
Officer,  Dr.  Kenneth S.  Schneider or any key  employee  would have a material
adverse effect on our business,  results of operations and financial  condition.
Except for Dr.  Schneider  and Michael  Breneisen,  our  President,  none of our
officers or key employees is currently bound by an employment  agreement for any
specific term. Our relationships with these remaining officers and key employees
can be terminated at any time.

      Our future success also depends on our ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial,  merchandising,
marketing and customer  service  personnel.  Competition  for such  personnel is
intense, and we cannot be certain that we will be able to successfully  attract,
assimilate or retain sufficiently  qualified  personnel.  Our inability to do so
could have a material adverse effect on our business,  results of operations and
financial condition.

OUR OPERATING  RESULTS ARE VOLATILE,  WHICH COULD AFFECT OUR AND YOUR ABILITY TO
PREDICT  OUR  OPERATING  RESULTS IN ANY GIVEN  PERIOD AND COULD ALSO  AFFECT OUR
MARKET PRICE.

      You should not rely on  quarter-to-quarter  comparisons  of our results of
operations as an indication of future  performance.  It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors.  In this event,  the price of our common stock is
likely to fall. We expect our quarterly  operating results to vary significantly
in the  future  due to a variety of  factors,  many of which are  outside of our
control. These factors include:

      -the demand for technology and technology-related products on the Interne
         in general or on Telebyeusa.com or Nextday.com in particular;

      - traffic levels on  Telebyeusa.com and Nextday.com and on other Web sites
         that refer consumers to our Web site;

      - the announcement or introduction of new or enhanced sites, services and
      products by us or our competitors;

      - our ability to attract and retain qualified personnel in a timely and
      effective manner;

      - acceptance by consumers and companies of the Internet for technology and
      technology-related products and advertising;

      - our ability to maintain and implement strategic alliances and
      relationships with manufacturers, suppliers, high-traffic Web sites and
        portals and other third parties;


<PAGE>

      - changes in product sales resulting from competition or other factors;

      - technical difficulties or system downtime affecting the Internet or the
      operation of Telebyteusa.com and Nextday.com;

      - the amount and timing of our costs related to advertising  and marketing
      efforts,  sales and other initiatives and the timing of revenues generated
      from such activities;

      - fees we may pay for distribution or content or other costs we may incur
         as we expand our operations;

      - changes in state and federal government regulations and their
      interpretations, especially with respect to the Internet;

      - costs related to possible acquisitions of businesses, technologies and
      services; and

      - general  economic  conditions  and those  conditions  that  specifically
      affect the Internet and Internet services.

      Traffic levels on Web sites may fluctuate on a seasonal basis, which could
result in a decrease in user traffic on  Telebyteusa.com  and Nextday.com during
certain  periods.  Seasonal or other  patterns may develop in our industry which
can  effect  the  quarterly  revenue  of our  firm  within  a year.



WE EXPECT TO INCUR SIGNIFICANT COSTS IN DEVELOPING OUR BRAND.

      To be  successful,  we must  continue  to  build  the  brand  identity  of
Telebyteusa.com  and  Nextday.com.  To  build  brand  awareness,  which  may  be
particularly  critical for Internet companies,  we must succeed in our marketing
efforts,  provide high-quality  services and increase traffic to Telebyteusa.com
and  Nextday.com.  If our  marketing  efforts are  unsuccessful  or if we cannot
increase our brand awareness,  our business,  financial condition and results of
operations would be materially  adversely affected.  We may find it necessary to
further  increase our financial  commitment to creating and maintaining a strong
brand name among  consumers.  If we incur  excessive  expenses in our attempt to
promote and maintain Telebyteusa.com and Nextday.com,  our business,  results of
operations and financial condition could be materially adversely affected.

IF INTERNET  USAGE  DECREASES AS A RESULT OF DECLINES IN USER  CONFIDENCE IN THE
INTEGRITY OF THE INTERNET, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.

      Our future success is  substantially  dependent on the continued growth in
the use of the Internet. The Internet is relatively new and is rapidly evolving.
Our business would be adversely  affected if Internet usage does not continue to
grow. Internet usage may be inhibited for a number of reasons, such as:

     - the Internet infrastructure may not be able to support the demands placed
      on it, or its performance and reliability may decline as usage grows;

      - security and  authentication  concerns with respect to transmission over
      the Internet of confidential information, such as credit card numbers, and
      attempts by unauthorized  computer users, commonly referred to as hackers,
      to penetrate online security systems; and

      - privacy concerns, such as those related to the placement by Web sites of
      certain  information to gather user information,  known as "cookies," on a
      user's hard drive without the user's knowledge or consent.



<PAGE>


WE MAY NOT BE ABLE TO ADAPT TO RAPIDLY  CHANGING  TECHNOLOGIES,  OR WE MAY INCUR
SIGNIFICANT COSTS IN DOING SO.

      Our market is  characterized by rapidly  changing  technologies,  evolving
industry  standards,  frequent new service  introductions  and changing customer
demands.  To be  successful,  we must adapt to our  rapidly  evolving  market by
continually  enhancing our Web site and  introducing new services to address our
customers' changing demands. We may use new technologies ineffectively or we may
fail  to  adapt  our  Web  site,   transaction-processing  systems  and  network
infrastructure  to  customer  requirements,  competitive  pressures  or emerging
industry  standards.  We could incur  substantial costs if we need to modify our
services or infrastructure in order to adapt to these or other changes affecting
providers  of  Internet  services.  Our  business,  results  of  operations  and
financial  condition  could be  materially  adversely  affected  if we  incurred
significant  costs to  adapt,  or cannot  adapt,  to these  changes.  Due to the
rapidly  changing nature of the Internet  business,  we may be subject to risks,
now and in the future, of which we are not currently aware.

WE MAY BE UNABLE TO CONTINUE TO DEVELOP COMPETITIVE PRODUCTS.

      The technology  upon which our products are based is subject to continuous
development of materials and processes. Our business is in large part contingent
upon the continuous  refinement of our technological  and engineering  expertise
and the  development of new or enhanced  products and  technologies  to meet the
rapidly  developing  demands of an evolving  market and  increased  competition.
There can be no assurance  that we will continue to be successful in our efforts
to develop new or refine  existing  products,  that such new products  will meet
with anticipated  levels of market  acceptance or that we will otherwise be able
to  timely  identify  and  respond  to  technological  improvements  made by our
competitors. Significant technological breakthroughs by others could also have a
material adverse effect on our business.

THE  INABILITY  TO RESPOND TO PRICING  PRESSURES  WITHIN THE INDUSTRY MAY HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

      Competition in the data communications and business-to-business  reselling
industries is intense and, in general,  is based  primarily on price. We compete
with a number of electronic data  communications  manufacturers who have broader
product lines and greater financial,  marketing and technical resources than us.
There can be no assurance that we will be able to improve the  productivity  and
efficiency  of our  manufacturing  processes  in order  to  respond  to  pricing
pressures,  and the failure to do so could have a material adverse effect on our
business. Our subsidiary competes with a number of providers of similar services
who offer a broader  array of services  and  greater  financial,  marketing  and
technical  resources.  There can be no assurance that we will be able to improve
the productivity  and efficiency of our servicing  processes in order to respond
to pricing  pressures,  and the  failure to do so could have a material  adverse
effect on our business.

OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR INDIVIDUAL STOCKHOLDERS.



<PAGE>


      The price of our Common Stock has fluctuated  substantially recently.
The trading price of our Common Stock may continue to be volatile in response to
factors such as:

      - actual or anticipated variations in our quarterly operating results;

      - announcements of new product or service offerings;

      - technological innovations;

      - competitive developments;

      - changes in financial estimates by securities analysts;

     - conditions and trends in the Internet and electronic commerce industries;

      - changes in the economic performance and/or market valuations of other
        electronic data communications companies; and

      - general market conditions and other general factors.

      Further,  the stock  markets  have  experienced  extreme  price and volume
fluctuations  that  have  particularly  affected  the  market  prices  of equity
securities  of many  technology  companies,  and have  often been  unrelated  or
disproportionate to the operating  performance of such companies.  Additionally,
the market price of our common  stock could be  adversely  affected by losses or
other negative news regarding one or more other companies, despite the fact that
such information is not related specifically to us and may even be contradictory
to information that is specifically applicable to us. These broad market factors
may adversely affect the market price of our common stock. In addition,  general
economic, political and market conditions such as recessions,  interest rates or
international  currency  fluctuations,  may adversely affect the market price of
the common  stock.  In the past,  following  periods of volatility in the market
price of a company's  securities,  securities class action  litigation has often
been instituted against such a company.  Such litigation,  if instituted,  could
result in  substantial  costs and a  diversion  of  management's  attention  and
resources,  which could have a material adverse effect on our business,  results
of operations and financial condition.

WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS.

      We have  never  paid any  cash or other  dividends  on our  common  stock.
Payment of dividends on our common stock is within the  discretion  of the Board
of Directors and will depend upon our  earnings,  our capital  requirements  and
financial  condition,  and other factors deemed  relevant by the Board.  For the
foreseeable  future,  the Board  intends to retain future  earnings,  if any, to
finance  our  business  operations  and  does  not  anticipate  paying  any cash
dividends with respect to the common stock.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.

      We may need to raise  additional funds in the future in order to fund more
aggressive brand promotion or more rapid  expansion,  to develop new or enhanced
services,  to  respond to  competitive  pressures  or to  acquire  complementary
businesses,  technologies  or services.  We cannot  assure you that any required
additional  financing will be available on terms  favorable to us, or at all. If
additional funds are raised by our issuing equity  securities,  stockholders may
experience  dilution of their  ownership  interest and such  securities may have
rights senior to those of the holders of our common stock.  If additional  funds
are raised by our issuing debt, we may be subject to certain  limitations on our
operations, including limitations on the payment of dividends. If adequate funds
are not available or not available on acceptable terms, we may be unable to fund
our  expansion,   successfully   promote  our  brand  name,  take  advantage  of
acquisition opportunities, develop or enhance services or respond to competitive
or  business  pressures,  which  could  have a  material  adverse  effect on our
business, results of operations and financial condition.




<PAGE>


WE DEPEND ON RELATIONSHIPS WITH THIRD PARTIES, AND THE LOSS, OR CHANGE IN TERMS,
OF ANY RELATIONSHIP COULD ADVERSELY AFFECT US.

      Our  business  could  be  adversely  affected  if we do not  maintain  our
existing commercial  relationships on terms as favorable as currently in effect,
if we do not  establish  additional  commercial  relationships  on  commercially
reasonable  terms  or if  our  commercial  relationships  do not  result  in the
expected  increased  use of our  Web  site.  We  have  entered  into  commercial
relationships  with various third  parties,  some of which require us to feature
them  prominently  in  certain  sections  of our Web site.  Existing  and future
arrangements  may  prevent  us from  entering  into  other  content  agreements,
advertising or sponsorship arrangements or other commercial relationships.  Many
companies  that we may  pursue  for a  commercial  relationship  may also  offer
competing  services.  As a result,  these  competitors may be reluctant to enter
into commercial relationships with us.

      We also depend on  establishing  and  maintaining  a number of  commercial
relationships  with  various  Web sites and  networks  to  increase  traffic  on
Telebyteusa.com and Nextday.com. There may be intense competition for placements
on these sites and networks,  and in the future we may not be able to enter into
distribution  relationships for such placement on commercially  reasonable terms
or at all. Even if we enter into distribution relationships with these Web sites
and networks, they may not attract significant numbers of consumers.  Therefore,
our Web site may receive less than the number of additional  consumers we expect
from  these  relationships.  Moreover,  we may have to pay  significant  fees to
establish or renew these or comparable relationships.

WE MAY NOT BE ABLE TO CONTINUE TO DEVELOP OUR CONTENT AND SERVICE  OFFERINGS  TO
REMAIN COMPETITIVE.

      If we fail to develop and introduce  new  features,  functions or services
effectively, it could have a material adverse effect on our business, results of
operations and financial condition.  To remain competitive,  we must continue to
enhance  and improve our  content  offerings,  the ease of use,  responsiveness,
functionality  and features of the  Telebyteusa.com  and  Nextday.com  sites and
develop  new  services  in  addition  to  continuing  to  improve  the  consumer
purchasing  experience on our site. These efforts may require the development or
licensing of  increasingly  complex  technologies.  We may not be  successful in
developing  or  introducing  new features,  functions  and  services,  and these
features,  functions and services may not achieve  market  acceptance or enhance
our brand loyalty.

WE MAY NOT BE ABLE TO  INCREASE  OR RETAIN OUR  INTERNAL  DIRECT  SALES FORCE TO
SUPPORT OUR ANTICIPATED GROWTH.

      We rely on our sales  personnel  to sell our  products  and  services.  To
support our growth, we need to substantially maintain, and may need to increase,
our internal  sales force over time. Our ability to do this involves a number of
risks, including:

      - the competition we face in hiring sales personnel;

      - our ability to integrate, motivate and retain our sales personnel; and

      - the length of time it takes new sales personnel to become productive.

      Our  business,  results of  operations  and  financial  condition  will be
adversely  affected if we do not develop,  retain and grow an effective internal
sales force.




<PAGE>



THE NUMBER OF INTERNET COMPETITORS CONTINUES TO INCREASE, AND WE MAY NOT BE ABLE
TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE COMPETITORS.

      Increased  competition  could result in less traffic to our Web site,  and
reduced  margins  or loss of market  share,  any of which  would have a material
adverse effect on our business,  results of operations and financial  condition.
We  compete  with  other Web  sites for  Internet  advertisers'  and  e-commerce
marketers' dollars.  The number of these Web sites has increased  significantly,
and we expect such  competition  to continue to increase.  Competition  may also
increase as a result of ongoing industry consolidation.

      We believe that our ability to compete  depends on many  factors,  many of
which are beyond our control. We believe that the principal  competitive factors
in attracting consumers to our Web site are:

      - brand awareness and loyalty;

      - strategic relationships with high-traffic Web sites and networks;

      - a positive shopping and purchasing experience for the consumer in our
         clients sites;

      - breadth and depth of selection of product;

      - price;

       - ease of use;

         - quality of content, other service offerings, and speed of our site:

         - quality of content, fulfillment and customer service by our clients;
         and

         - Web site functionality, responsiveness, reliability, and speed.

         Many of our existing competitors,  as well as a number of potential new
competitors,  have longer operating histories, greater name recognition,  larger
customer  bases and  significantly  greater  financial,  technical and marketing
resources  than we do. This may allow them to devote  greater  resources than we
can to the development and promotion of customer services.  Such competitors may
also  engage  in  more  extensive  research  and  development,   undertake  more
far-reaching  marketing  campaigns,  adopt more aggressive  pricing policies and
make more attractive offers to existing and potential employees,  manufacturers,
retailers,  distribution  partners, and advertisers and e-commerce partners. Our
competitors  may  develop  services  that  are  equal  or  superior  to those of
Telebyteusa.com  and Nextday.com or that achieve greater market  acceptance than
Telebyteusa.com and Nextday.com.  In addition, current and potential competitors
have established or may establish cooperative  relationships among themselves or
with third  parties to  increase  the  ability of their  services to address the
needs of advertisers and e-commerce marketers.  As a result, it is possible that
new competitors may emerge and rapidly acquire  significant market share. We may
not be able to compete successfully or competitive pressures may have a material
adverse effect on our business, results of operations and financial condition.

IF THE INTERNET  DOES NOT GROW AS A MEDIUM FOR COMMERCE,  OUR BUSINESS  COULD BE
MATERIALLY ADVERSELY AFFECTED.

         Our future  success and revenue growth will depend upon the adoption of
the Internet by consumers and manufacturers as a mainstream medium for commerce.
While we believe that our services offer significant advantages to consumers and
manufacturers and retailers,  we cannot be certain that widespread acceptance of
Internet commerce in general, or of our services in particular,  will occur. Our
success  assumes that consumers who have  historically  relied upon  traditional
means of commerce to purchase  technology  or  technology-related  products will
accept new methods of conducting business and exchanging information.  Moreover,
critical issues concerning  remote purchases on the Internet,  including clarity
of picture,  and the commercial  use of the Internet,  including ease of access,
security,  reliability,  cost, and quality of service, remain unresolved and may
impact the growth of Internet use. If the market for  Internet-based  technology
sales fails to develop,  develops more slowly than expected or becomes saturated
with  competitors,  or if our  services do not achieve  market  acceptance,  our
business,  results of  operations  and financial  condition  could be materially
adversely affected.



<PAGE>


         The market for  Internet-based  purchasing  services has only  recently
begun to develop and is rapidly evolving. While many Internet commerce companies
have grown in terms of revenue,  few are  profitable.  We cannot  assure that we
will be profitable,  and we anticipate losses for the foreseeable  future. As is
typical for a new and rapidly evolving  industry,  demand and market  acceptance
for recently introduced services and products over the Internet are subject to a
high  level of  uncertainty  and there are few  proven  services  and  products.
Moreover, as the market for selling technology products online is relatively new
and  evolving,  it is difficult to predict the future  growth rate,  if any, and
size of this market.

IF OUR SYSTEM'S OR THE INTERNET'S  INFRASTRUCTURE DO NOT GROW OR IMPROVE TO MEET
INCREASED  CONSUMER  DEMANDS,  THE GROWTH OF OUR  BUSINESS  COULD BE  MATERIALLY
ADVERSELY AFFECTED.

         Our ability to retain and attract  consumers  and  advertisers,  and to
achieve market acceptance of our services and our brand,  depends  significantly
upon the  performance  of our systems and network  infrastructure.  Our revenues
depend on the number of visitors  to our Web site and the  traffic and  activity
created  by  those   visitors.   Any  system  or  network  failure  that  causes
interruption  or  slower  response  time of our  services  could  result in less
traffic  to our Web site  and,  if  sustained  or  repeated,  could  reduce  the
attractiveness  of our  services  to  consumers,  manufacturers,  retailers  and
advertisers. We have experienced periodic system interruptions, which we believe
may  continue  to occur from time to time.  An increase in the volume of our Web
site traffic  could strain the capacity of our technical  infrastructure,  which
could lead to slower  response  times or system  failures.  This would cause the
number of,  advertising  impressions,  click  throughs  to our  clients  and our
information offerings to decline, any of which could hurt our revenue growth and
our brand loyalty. In addition, if traffic increases,  we cannot assure you that
our  technical  infrastructure,  such as a reliable  network  backbone  with the
necessary speed and data capacity and the development of complementary  products
such as high-speed  modems,  will be able to increase  accordingly,  and we face
risks  related to our  ability to scale up to  expected  consumer  levels  while
maintaining performance. Further, security and authentication concerns regarding
the transmission of confidential  information over the Internet,  such as credit
card numbers, may continue.  Any failure of our server and networking systems to
handle current or higher volumes of traffic could have a material adverse effect
on our business, results of operations and financial condition.

         The recent growth in Internet  traffic has caused  frequent  periods of
decreased  performance,  requiring  Internet service  providers and users of the
Internet to upgrade  their  infrastructures.  If  Internet  usage  continues  to
increase  rapidly,  the Internet  infrastructure  may not be able to support the
demands  placed on it by this growth and its  performance  and  reliability  may
decline.  If these outages or delays on the Internet occur  frequently,  overall
Internet  usage or usage of our Web site could  increase more slowly or decline.
Our ability to increase  the speed with which we provide  services to  consumers
and to increase the scope of such services is limited by and dependent  upon the
speed and reliability of the Internet. Consequently, the emergence and growth of
the market for our services is dependent  on future  improvements  to the entire
Internet.

         In  addition,  our  operations  depend upon our ability to maintain and
protect our computer systems.  Our third party provider maintains,  within their
own control and to their own  specifications,  the only backup disaster recovery
program.  The system therefore is vulnerable to damage from a disastrous  event,
such as  fire,  flood,  earthquake,  power  loss,  telecommunications  failures,
hackers and similar  occurrences  which cannot be controlled or corrected by the
third  party as well as being  vulnerable  to any  failure by the third party to
adequately  maintain  or protect  our  equipment  or their own  facilities.  The
occurrence  of a disastrous  event could have a material  adverse  effect on our
business, results of operations and financial condition.



<PAGE>



WE MAY BE SUBJECT TO LIABILITY FOR THE INTERNET CONTENT THAT WE PUBLISH.

         We could be exposed to liability for third-party  information  that may
be  accessible  through our Web site.  Such  claims  might  assert,  among other
things, that, by directly or indirectly providing links to Web sites operated by
third parties,  we should be liable for copyright or trademark  infringement  or
other wrongful  actions by such third parties through such Web sites. It is also
possible that, if any third-party content  information  provided on our Web site
contains  errors,  consumers might make claims against us for losses incurred in
reliance on such information.

         At times,  we also enter into  agreements  with other  companies  under
which any revenue  that results  from the  purchase of services  through  direct
links to or from our Web site is  shared.  Such  arrangements  may  expose us to
additional legal risks and uncertainties,  including local,  state,  federal and
foreign  government  regulation and potential  liabilities to consumers of these
services, even if we do not provide the services ourselves. We cannot assure you
that any indemnification provided to us in our agreements with these parties, if
available, will be adequate.

         Even to the extent any of the claims referred to above do not result in
liability to us, we could incur significant costs in investigating and defending
against such claims. The imposition on us of potential liability for information
carried on or  disseminated  through our system  could  require us to  implement
measures to reduce our  exposure  to such  liability,  which  might  require the
expenditure of substantial resources or limit the attractiveness of our services
to consumers and others.

         We may not be able to  obtain  and  maintain  adequate  insurance.  Our
general  liability  insurance may not cover all potential claims to which we are
exposed and may not be adequate to  indemnify us for all  liability  that may be
imposed.  Any  imposition of liability that is not covered by insurance or is in
excess  of  insurance  coverage  could  have a  material  adverse  effect on our
business, results of operations and financial condition.

IF OUR ONLINE SECURITY MEASURES FAIL, OUR BUSINESS WOULD BE MATERIALLY ADVERSELY
AFFECTED.

         Our network is vulnerable to computer  viruses,  physical or electronic
break-ins and similar disruption.  We expect that these problems will occur from
time to time. The inadvertent  transmission of computer  viruses could expose us
to  litigation  or to a  material  risk of  loss.  Such  security  breaches  and
inadvertent  transmissions could have a material adverse effect on our business,
results of operations and financial condition.

         In our prior offerings of certain online payment services, we relied on
technology   licensed   from  third   parties  to  provide  the   security   and
authentication   necessary  to  effect  secure   transmission   of  confidential
information,  such  as  consumer  credit  card  numbers.  Advances  in  computer
capabilities,  new discoveries in the field of cryptography,  or other events or
developments  may result in a compromise or breach of the algorithms that we use
to protect our consumers, transaction data or our software vendors and products.
Any  well-publicized  compromise of security  could deter use of the Internet in
general or use of the Internet to conduct transactions that involve transmitting
confidential information or downloading sensitive materials. Someone who is able
to circumvent our security measures could misappropriate proprietary information
or  cause  interruptions  in  our  operations.  We  may be  required  to  expend
significant  capital  and other  resources  to  protect  against  such  security
breaches or alleviate problems caused by such breaches.  Such expenditures could
have a  material  adverse  effect on our  business,  results of  operations  and
financial condition.




<PAGE>



WE MAY BE UNSUCCESSFUL IN ENTERING NEW BUSINESS AREAS.

         We may choose to expand our  operations  by  developing  new Web sites,
promoting new or  complementary  products or formats,  expanding the breadth and
depth of products and services  offered or expanding our market presence through
relationships with third parties. In addition,  we may pursue the acquisition of
new or complementary businesses,  products or technologies,  although we have no
present  plans or  commitments  with  respect  to any  material  acquisition  or
investment.  If we acquire a company, we could face difficulties in assimilating
that  company's  personnel  and  operations.  In addition,  key personnel of the
acquired company might decide not to work for us. Furthermore,  any new business
or Web site launched by us not favorably  received by consumers could damage the
reputation of the  Telebyteusa.com  and  Nextday.com  brand.  The lack of market
acceptance  of such efforts or our inability to generate  satisfactory  revenues
from such  expanded  services  or  products  to offset  their  cost could have a
material  adverse  effect on our business,  results of operations  and financial
condition.

IF GOVERNMENT REGULATION INCREASES, WE MAY NEED TO CHANGE THE MANNER IN WHICH WE
CONDUCT OUR BUSINESS.

         The adoption of new  legislation or regulation  which impacts  Internet
businesses,  the application of laws and regulations  from  jurisdictions  whose
laws do not currently apply to our business, or the application of existing laws
and  regulations to the Internet and other online services could have a material
adverse  effect  on our  business.  We  are  not  currently  subject  to  direct
regulation  by  any  domestic  or  foreign   governmental   agency,  other  than
regulations applicable to businesses generally, and laws or regulations directly
applicable  to  access  to  online  commerce.  However,  due to  the  increasing
popularity  and use of the Internet and other  online  services,  it is possible
that laws and  regulations  may be adopted with respect to the Internet or other
online  services  covering  issues  such  as  user  privacy,  pricing,  content,
copyrights,  distribution,  and  characteristics  and  quality of  products  and
services.  Furthermore,  the  growth  and  development  of the market for online
commerce  may prompt more  stringent  consumer  protection  laws that may impose
additional burdens on those companies  conducting  business online. The adoption
of any additional laws or regulations may decrease the growth of the Internet or
other  online  services,  which  could,  in turn,  decrease  the  demand for our
products and services and  increase our cost of doing  business.  Moreover,  the
applicability  to the  Internet and other  online  services of existing  laws in
various  jurisdictions  governing issues such as property  ownership,  sales and
other taxes and personal privacy is uncertain and may take years to resolve.  In
addition,  as our Web site is  available  over the  Internet  in many states and
foreign countries,  and as we sell to numerous consumers residing in such states
and foreign  countries,  such  jurisdictions  may claim that we are  required to
qualify to do business as a foreign  corporation  in each such state and foreign
country.  We are qualified to do business in only two states, and our failure to
qualify as a foreign  corporation in a jurisdiction  where such qualification is
required could subject us to taxes and penalties for the failure to qualify.

IF THE  PROTECTION  OF OUR  INTELLECTUAL  PROPERTY  RIGHTS  IS  INADEQUATE,  OUR
BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED.

         Although our ability to compete depends, to some extent, upon copyright
law and confidentiality  agreements,  we believe that the technical and creative
skills of our personnel,  continued  development of our proprietary  systems and
technology,  brand name  recognition and reliable Web site  maintenance are more
essential in establishing and  strengthening  our brand.  Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our services or to obtain and use information  that we regard as proprietary.
Policing unauthorized use of our proprietary rights is difficult. Other than our
registration  of certain domain names,  we do not have any other  protection for
the "Telebyteusa.com and Nextday.com" names. We do not believe that we or anyone
else can  obtain  protection  for such  names in the  United  States.  Effective
trademark,  service  mark,  copyright  and trade  secret  protection  may not be
available in every country in which our products and services are made available
online.  In  addition,  litigation  may be necessary in the future to enforce or
protect  our  intellectual  property  rights  or to  defend  against  claims  or
infringement. As part of our confidentiality procedures, we generally enter into
agreements with our employees and  consultants.  We cannot assure that the steps
taken by us will prevent  misappropriation  of technology or that the agreements
entered  into for that  purpose  will be  enforceable.  Misappropriation  of our
intellectual  property or the costs  associated with litigation  related thereto
could have a material adverse effect on our business,  results of operations and
financial condition.



<PAGE>



EXISTING STOCKHOLDERS WILL BE ABLE TO EXERCISE SIGNIFICANT CONTROL OVER US.

         Approximately 22% of the outstanding common stock is beneficially owned
by  Dr.  Kenneth  S.  Schneider,  our  Chief  Executive  Officer.   Accordingly,
Dr.Schneider  will have  substantial  influence  over the  outcome of any matter
submitted to a vote of stockholders, including the election of directors and the
approval of significant  corporate  transactions  (such as acquisitions of us or
our assets).  Such  influence  could delay or prevent a change of control of our
Company. Please see "Principal Stockholders" and "Description of Securities."

WE MAY BE UNABLE TO RESPOND TO EVENTS OUTSIDE OUR CONTROL

         Our  business  may also be  adversely  affected  by matters  and events
affecting businesses  generally,  including,  without limitation,  political and
economic events,  labor unrest, acts of God, war and other events outside of our
control.

Item 7.           Financial Statements

The audited financial statements of the Company as of December 31, 2000 and 1999
and for the years then ended are  included in this Annual  Report on Form 10-KSB
following Item 13 thereof.

Item 8.          Changes in and Disagreements with Accountants in Accounting and
Financial Disclosures

None


Part III

Item 9. Directors, Executive Officers, Promoters, and Control Persons;
        Compliance with Section 16(a) of the Exchange Act

The following table sets forth certain information concerning Company's officers
and directors as of December 31, 2000. Telebyte's directors are elected to serve
until the next annual meeting of shareholders or until their successors are
elected and qualified. The executive officers are appointed annually by, and
serve at the pleasure of, the Board of Directors.

<TABLE>
<CAPTION>
Name, age, and positions      Business experience during past         Director
held with the Company         five years and principal occupation     since
---------------------         -----------------------------------     -----
<S>                           <C>                                       <C>
Kenneth S. Schneider, Ph.D.,  Dr. Schneider served as Vice President    1983
age 55, Chairman, CEO,        and Treasurer from August 1983 to
Secretary, and                January 1999. He was elected
Director                      Secretary in June 1991. He became
                              Chairman of the Board and CEO in
                              January 1999.

Michael Breneisen, age 36,    Mr. Breneisen served as Controller        1999
President, COO, CFO,          from July 1992 and Vice President
Treasurer and Director        and CFO from January 1997.  He
                              became President, COO and CFO
                              in January 1999 and Treasurer in
                              March 2000. He became CEO of
                              Nextday.com in June 1999.

Jamil Sopher, age 57          Mr. Sopher is COO of Unisphere Inc.       1996
Director                      since September 2000.  Mr. Sopher
                              worked for the World Bank where he
                              was employed from 1980 to 2000.

Jonathan D. Casher, age 56    Mr. Casher is the founder, Chairman       2000
Director                      and CEO of RECAP, Inc.

Jim Wright, age 51            Mr. Wright was elected Vice President
Vice President,               in September 2000.  He previously held
Chief Marketing               the position of general manager of
Officer                       Consultronics, Inc. from 1992 to 2000.
</TABLE>


Section 16 Compliance

Based upon a review of copies of the forms required to be filed under Section
16(a) of the Securities Exchange Act of 1934 or written representations from
officers and directors, the Company believes all officers and directors, and
greater than ten percent owners of the Company's common stock have complied with
Section 16(a.)


<PAGE>



Item 10. Executive Compensation

The following table provides summary information concerning the cash and certain
other compensation paid or accrued by the Company during the last three fiscal
years to the executive officers of the Company whose cash compensation exceeded
$100,000. The table includes Company contributions on the officer's behalf to
the Company's 401(k) Plan.

<TABLE>
<CAPTION>

                                                         Summary Compensation Table

                                        Annual Compensation                        Long-Term Compensation
                                        -------------------                        ----------------------
                                                                              Awards                   Payouts
                                                                              ------                   -------
         (a)             (b)        (c)        (d)          (e)          (f)            (g)              (h)                (i)
                                                                     Restricted
       Name and                                         Other Annual   Stock           Stock          Long-Term         All Other
 Principal Position      Year     Salary      Bonus     Compensation   Awards       Options/SARs   Incentive Payout    Compensation
 ------------------      ----     ------      -----     ------------   ------       ------------   ----------------    ------------
                                    ($)        ($)          ($)         (No.)          (No.)             ($)                ($)
<S>                    <C>        <C>         <C>         <C>               <C>           <C>          <C>                <C>
Kenneth S. Schneider   2000       $136,836       0                          0             0            $4,080(3)          $5,110
   Chairman, CEO,                                            0
Secretary & Director   1999(1)    $125,685       0           0              0             0            $4,080(3)          $5,112

                       1998       $112,534    $22,000     $10,170(2)        0             0            $4,080(3)          $7,104

   Joel A. Kramer      1999(1)     $10,574       0         $1,726(2)        0             0               0              $95,243(4)
      (Former)
   President, CEO      1998       $124,306    $25,000     $20,130(2)        0             0            $5,747(3)          $8,040
     & Director

</TABLE>


(1)  Mr. Kramer left the employ of the Company in January 1999, at which time
     Dr. Schneider was elected the Chief Executive Officer by the Board of
     Directors, and at which time he dropped the title of Vice President.

(2)  Commissions-Mr. Kramer received a 2.5% commission of net sales to customers
     not located within the United States.

(3)  Deferred Compensation - see Long-Term Incentive Plans Table below.

(4)  Consulting services and fringes.

             Long-Term Incentive Plans - Awards in Last Fiscal Year

<TABLE>
<CAPTION>
                                                                 Estimated Future Payouts under Non-Stock Price-Based Plans
                                                                 ----------------------------------------------------------
                                            Performance or Other
                           Number of Shares,   Period Until
                           Units or Other       Maturation           Threshold           Target            Maximum
         Name                Rights (#)          Or Payout            ($ or #)          ($ or #)          ($ or #)
----------------------- ------------------ ---------------------- ----------------- ----------------- ------------------
<S>                            <C>            <C>                    <C>               <C>               <C>
 Kenneth S. Schneider                         April 16, 2010         $26,667(1)        $26,667(1)        $26,667(1)
    Chairman, CEO,
 Secretary & Director
</TABLE>


(1)  In 1990, the Company entered into a deferred compensation agreement with
     Kenneth S. Schneider, pursuant to


<PAGE>



     which he will receive a defined amount, approximately 30% of his 1990 base
     salary, each year for a period of 10 years after reaching age 65. The
     deferred compensation plan is funded through life insurance and is being
     provided for currently. The expense charged to operations in 2000 for such
     future obligations was $4,080.





                   Aggregate Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
                                                   % of Total Options         Exercise or
                            Number of Options     Granted to Employees        Base Price             Expiration
          Name                   Granted          in Fiscal Year 2000          ($/Share)                Date
          ----                   -------          -------------------          ---------                ----
<S>                               <C>                    <C>                    <C>                  <C>
     Joel A. Kramer                 0                      0                       -                      -

  Kenneth S. Schneider            5,000                  16.0%                  $1.625               12/20/2010
</TABLE>



The following table sets forth information concerning each exercise of stock
options during fiscal 2000 by each of the named executive officers and fiscal
year-end value of unexercised options:



Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>

                                                                       Number of          Value of Unexercised
                            Number of Shares         Value        Unexercised Options     In-the-Money Options
          Name            Acquired on Exercise    Realized ($)    at December 31, 2000   at December 31, 2000(1)
          ----            --------------------    ------------    --------------------   -----------------------
<S>                                 <C>                <C>            <C>                       <C>
     Joel A. Kramer                 0                  0                   0                      $0
  Kenneth S. Schneider              0                  0              205,000 (2)               $94,000
</TABLE>

(1)  Calculation based upon the closing price of the Company's common stock
     ($1.50 per share) as reported by Nasdaq Trading and Market Services on
     December 31, 2000.

(2)  60,000 option shares vest June 30, 2004, and the remaining 100,000 option
     shares vest January 1, 2005; subject, however, to accelerated events if
     certain targets are met.


Compensation Plans and Other Compensation

The Company's Board of Directors, with the approval of the stockholders, has
adopted a Stock Option Plan (the "1999 Plan") and has reserved for issuance
thereunder 500,000 shares of the Company's common stock. As of December 31,
2000, options to purchase an aggregate of 438,000 shares have been granted and
there were 62,000 shares available for grants under the 1999 Plan. Pursuant to
the 1999 Plan, the Company may grant options under the 1999 Plan which are
intended either to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("Incentive Stock Options"), or not so qualify ("Nonstatutory Stock Options").

The 1999 Plan provides for its administration by the Board of Directors or by a
committee (the "Stock Option Committee") consisting of at least one director
chosen by the Board of Directors. The Board of Directors or the


<PAGE>



Stock Option Committee has authority (subject to certain restrictions) to select
from the group of eligible employees, non-employee directors, consultants and
advisors the individuals or entities to whom options will be granted, and to
determine the times at which and the exercise price for which options will be
granted.

The exercise price of shares underlying an Incentive Stock option may not be
less than the fair market value (as such term is defined in the 1999 Plan) of
the common stock on the date upon which such option is granted. In addition, in
the case of a recipient of an Incentive Stock Option who, at the time the option
is granted, owns more than 10% of the total combined voting power of all classes
of stock of the Company or of a parent or subsidiary corporation of the Company
(a "10% Stockholder"), the exercise price of the shares subject to such option
must be at least 110% of the fair market value of the common stock on the date
upon which such option is granted.

The exercise price of shares underlying a Nonstatutory Stock Option will be
determined by the Board of Directors or the Stock Option Committee at the time
of grant and need not be equal to or greater than the fair market value of the
Company's common stock.

In 1994 the Company adopted the 1993 Stock Option Plan (the "1993 Plan") under
which options to purchase 100,000 shares of the common stock were reserved. All
directors, officers or other key employees of the Company are eligible to
participate in the 1993 Plan, which is administered by the Board of Directors of
the Company. As of December 31, 2000, there were options to purchase 16,050
shares available under the 1993 Plan. Pursuant to the 1993 Plan, the Company is
permitted to issue incentive stock options.

In 1987, the Company adopted a plan, which provided for grants to officers and
key employees of the Company, of incentive stock options to purchase up to an
aggregate of 250,000 shares of the Company's common stock. Options to purchase
10,800 shares are outstanding.

The Company has an informal bonus plan in which officers and other key personnel
participate. The bonus award, if any, is fixed annually by the Board of
Directors. There were no bonuses paid under this plan during fiscal year 2000.

The Company maintains a deferred compensation plan under Internal Revenue Code
Section 401(k). All employees are eligible to participate; the Company
contributes 50% of the first 2% deferred by the employee. Each employee may
voluntarily contribute up to 15% of annual compensation, or the maximum allowed
as determined by the Internal Revenue Code.

During 2000, the Company renewed, for an additional three-year term, the
employment agreement with Kenneth S. Schneider. The employment agreement
provides that Dr. Schneider would receive a minimum salary of $105,155 per
annum. During the employment period Dr. Schneider is entitled upon termination
or expiration of the agreement under certain circumstances (including a change
of control) to certain severance benefits.

During 1999, the Company entered into a three year employment agreement with
Michael Breneisen. The employment agreement provides that Mr. Breneisen will
receive a minimum salary of $75,000 per annum. During the employment period Mr.
Breneisen is entitled upon termination or expiration of the agreement under
certain circumstances (including a change of control) to certain severance
benefits.

Except for life and medical insurance benefit programs, which are available to
all employees, the Company has no other compensation plans.

The outside directors do not receive a per meeting fee, but do receive
reimbursement of expenses for attending each meeting and is eligible to receive
stock options.


<PAGE>



Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth as of December 31, 2000 information concerning
(i) the shares held by each person or group known to own beneficially more than
5% of the outstanding shares of common stock, (ii) shares owned by the Chief
Executive Officer (iii) shares owned by all executive officers and directors as
a group.

<TABLE>
<CAPTION>
  Name and Address of                 Number of Shares          Percent of
  Beneficial Owner                    Beneficially Owned        Class
  ----------------                    ------------------        -----
<S>                                    <C>                      <C>
  Kenneth S. Schneider                 328,037(1)               23.4%
  270 Pulaski Road
  Greenlawn, NY 11740


  Michael Breneisen                     81,900 (2)              5.8%
  270 Pulaski Road
  Greenlawn, NY 11740


  Jamil Sopher                          36,730 (3)              2.6%
  270 Pulaski Road
  Greenlawn, NY 11740


  Jonathan D. Casher                      6,000 (4)             0.4%
  270 Pulaski Road
  Greenlawn, NY 11740



  Jim Wright                             15,000 (5)             1.1%
  270 Pulaski Road
  Greenlawn, NY 11740


  All executive officers and directors    467,667               33.3%
  As a group (5 in number)
</TABLE>


(1)  Includes 45,000 shares issuable upon exercise of stock options granted
     under the Company's 1999 Stock Option Plan. Does not include 160,000 shares
     issuable upon exercise of stock options under the 1999 Plan. Of such
     options 60,000 option shares vest June 30, 2004, and the remaining 100,000
     option shares vest January 1, 2005; subject, however, to acceleration if
     certain targets are met.

(2)  Includes 5,000 shares issuable upon exercise of stock options granted under
     the Company's 1987 Stock Option Plan. Includes 45,000 shares issuable upon
     exercise of stock options granted under the Company's 1999 Stock Option
     Plan. Does not include 160,000 shares issuable upon exercise of stock
     options under the 1999 Plan. Of such options 60,000 option shares vest June
     30, 2004, and the remaining 100,000 option shares vest January 1, 2005;
     subject, however, to acceleration if certain targets are met.

(3)  Includes 20,000 shares issuable upon exercise of stock options granted
     under the Company's 1993 Stock Option Plan. Includes 15,000 shares issuable
     upon exercise of stock options granted under the Company's 1999 Stock
     Option Plan.

(4)  Includes 1,000 shares issuable upon exercise of stock options granted under
     the Company's 1993 Stock Option Plan. Includes 5,000 shares issuable upon
     exercise of stock options granted under the Company's 1999 Stock Option
     Plan.

(5)  Includes 15,000 shares issuable upon exercise of stock options granted
     under the Company's 1993 Stock Option Plan.



<PAGE>

Item 12. Certain Relationships and Related Transactions
Effective  January 20,  1999,  Joel A.  Kramer,  then the Chairman of the Board,
President and Chief Executive  Officer of the Company,  resigned such positions.
However,  it was intended  that Mr.  Kramer  would serve as a consultant  to the
Company through January 19, 2002 for an aggregate consideration of $165,000 plus
reimbursement  for certain expenses.  In addition,  the Company purchased all of
the shares of common  stock of the Company  owned by Mr.  Kramer and Mr.  Kramer
agreed  to cancel  options  to  purchase  10,000  shares of common  stock of the
Company for an aggregate consideration of $1,075,190,  of which $867,510 was for
such shares,  $17,680 was for the  cancellation of such options and $190,000 was
in exchange for Mr.  Kramer's  restrictive  covenant.  In addition,  Mr.  Kramer
agreed not to compete  with the business of the Company  until  January 19, 2003
and released the Company from certain  potential claims relative to his previous
employment.  The Company  transferred  a life  insurance  policy to Mr.  Kramer,
previously  maintained  for Mr.  Kramer's  benefit  and  having a cash  value of
approximately $80,000.

In December 1999, the Company  received  information  indicating that Mr. Kramer
had  breached  certain  of the  non-competition  provisions  of  the  Consulting
Agreement  entered  into by Mr.  Kramer  and the  Company  and also of the Stock
Purchase Agreement and the Termination  Agreement entered into by Mr. Kramer and
the Company.  In response to this  information  the Company  asserted its rights
under the  Consulting  Agreement and cancelled it for cause on January 12, 2000,
and ceased making payments  thereunder.  The Company is considering what further
legal  action it may take if any with  respect to this  situation  as  warranted
under the circumstances.

Effective January 20, 1999 Dr. Kenneth S. Schneider was elected as Chairman of
the Board and Chief Executive Office and Michael Breneisen as President and
Chief Operating Officer of the Company. Dr.Schneider was a co-founder of the
Company and has served as a Senior Vice President, Secretary, Treasurer and
Director. Mr. Breneisen has served as Vice President and Chief Financial
Officer; he will also continue to serve as Chief Financial Officer and act as
a Director.

<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits

3(a) The Company's  Certificate of  Incorporation  under the State of Nevada was
filed as an  Exhibit  with the  Proxy  Statement  filed in June  1987  (File No.
0-11883) and is incorporated by reference herein.

 3(b) The  By-laws  of the  Company  as a Nevada  corporation  were  filed as an
Exhibit  on Form  8-K in  third  quarter  of 1987  (File  No.  0-11883)  and are
incorporated by reference herein.

3(c) The Company's  Certificate of Incorporation under the State of Delaware and
is attached herein.

3(d) The By-laws of the Company as a Delaware corporation and is attached
herein.

3(e) Certificate of ownership and merger, merging Telebyte Technology, Inc.
(a Nevada corporation) into Telebyte Technology, Inc. (a Delaware corporation)
 and is attached herein.

10(a) The  Company's  1993  Stock  Option  Plan was filed as an  Exhibit  to the
Company's  definitive 1994 proxy statement filed in May 1994 (File No. 0-11883),
and is incorporated by reference herein.

10(b) Commercial mortgage and consolidation agreement dated May 25, 1988 between
Home  Federal  Savings  Bank  (now  known  as  North  Fork  Bank)  and  Telebyte
Technology,  Inc.,  filed as an Exhibit to the  Company's  1988 Annual Report on
Form 10-K (File No. 0-11883) and is incorporated by reference herein.
10(c) Deferred compensation agreements dated December 12, 1990 between Telebyte
Technology, Inc. and Joel A. Kramer and Kenneth S.Schneider, filed as an Exhibit
to the Company's 1990 Annual Report on Form 10-K (File No. 0-11883) and is
incorporated by reference herein. 10(e) $1,000,000 Revolving Line of Credit
agreement dated June 23, 1994 between Merrill Lynch and Telebyte Technology,Inc.
and was filed as an exhibit on Form 10-KSB for the year ended December 31, 1994
(File No. 0-11883) and is incorporated by reference herein.

10(f) Employment  Agreements  between the Company and Kenneth S. Schneider dated
August 1, 1997 and was filed as an  exhibit  on Form  10-KSB  for the year ended
December 31, 1997 (File No. 0-11883) and is incorporated by reference herein.

10(g)  Mortgage  Loan  Modification  Agreement  dated March 18, 1998 between the
Company and Home  Federal  Savings Bank 1997 and was filed as an exhibit on Form
10-KSB  for  the  year  ended  December  31,  1998  (File  No.  0-11883)  and is
incorporated by reference herein.

10(h) Stock  Purchase  Agreement  dated January 20, 1999 between the Company and
Joel A. Kramer and was filed as an exhibit to the  Company's  current  report on
Form 8K filed on January 27, 1999.

10(i)  Consulting  Agreement dated January 20, 1999 between the Company and Joel
A. Kramer and was filed as an exhibit to the Company's current report on Form 8K
filed on January 27, 1999.

10(j) Termination  Agreement dated January 20, 1999 between the Company and Joel
A. Kramer and was filed as an exhibit to the Company's current report on Form 8K
filed on January 27, 1999.

10(k)  Agreement and Release dated January 20, 1999 between the Company and Joel
A. Kramer and was filed as an exhibit to the Company's current report on Form 8K
filed on January 27, 1999.

10(l) Employment  Agreement between the Company and Michael Breneisen dated June
25, 1999 and is attached herein.

10(m) The Company's 1999 Stock Option Plan and is attached herein.

10(n) $1,000,000 Reducing Revolving Line of Credit Agreement dated January 20,
1999 between Merrill Lynch and Telebyte Technology, Inc. and is attached herein.

(21) Subsidiaries of the Small Business Issuer

(23) Consent of Grant Thornton LLP, independent certified public accountants.

(27) Financial Data Schedule.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter for the fiscal
year ended December 31, 2000.


<PAGE>



                                   Signatures

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  Registrant  had duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

TELEBYTE, INC.



By:      __________\s\_________________
         Kenneth S. Schneider
         Chairman of the Board
         (Chief Executive Officer)


By:      ___________\s\________________
         Michael Breneisen
         President
       (Chief Operating Officer and Principal Financial and Accounting Officer)


Date:    April 2, 2001


In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed below by the following  persons on behalf of the  Registrant,  and in the
capacities and on the dates indicated.


April 2, 2001    __________\s\_____________
Kenneth S. Schneider, Director



April 2, 2001    ___________\s\____________
Jamil Sopher, Director


April 2, 2001    ___________\s\____________
Michael Breneisen, Director


April 2, 2001    ___________\s\____________
Jonathan D. Casher, Director

<PAGE>

                          Telebyte, Inc. and Subsidiary

                          INDEX TO FINANCIAL STATEMENTS





                                                                            Page


Report of Independent Certified Public Accountants                           F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999                 F-3

Consolidated Statements of Earnings for the years ended
    December 31, 2000 and 1999                                               F-5

Consolidated Statement of Shareholders' Equity for the years
    ended December 31, 2000 and 1999                                         F-6

Consolidated Statements of Cash Flows for the years ended
    December 31, 2000 and 1999                                               F-7

Notes to Consolidated Financial Statements                            F-8 - F-21






<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




To the Board of Directors and Shareholders of
   Telebyte, Inc. and Subsidiary


We have audited the accompanying  consolidated balance sheets of Telebyte,  Inc.
and  Subsidiary as of December 31, 2000 and 1999,  and the related  consolidated
statements of earnings,  shareholders'  equity and cash flows for the years then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Telebyte, Inc. and
Subsidiary  as of December 31, 2000 and 1999,  and the  consolidated  results of
their  operations  and their cash flows for the years then ended,  in conformity
with accounting principles generally accepted in the United States of America.





Melville, New York
March 15, 2001




<PAGE>



                          Telebyte, Inc. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,



<TABLE>
<CAPTION>
                                                     2000         1999
                                                  ----------   ----------
<S>                                               <C>          <C>
                                ASSETS
CURRENT ASSETS
    Cash and cash equivalents                     $  433,703   $  370,527
    Accounts receivable, net of allowance of
       $12,500 in 2000 and $16,000 in 1999           776,668      858,917
    Inventories                                    1,674,693    1,519,277
    Prepaid expenses and other                       118,553       55,124
    Deferred income taxes                            193,000      135,000
                                                  ----------   ----------

         Total current assets                      3,196,617    2,938,845




PROPERTY AND EQUIPMENT - AT COST,
    less accumulated depreciation                  1,186,410    1,124,583




OTHER ASSETS, NET                                    232,557      235,351
                                                  ----------   ----------


                                                  $4,615,584   $4,298,779
                                                  ==========   ==========
</TABLE>





The accompanying notes are an integral part of these statements.



<PAGE>



                          Telebyte, Inc. and Subsidiary

                     CONSOLIDATED BALANCE SHEETS (continued)

                                  December 31,


<TABLE>
<CAPTION>
          LIABILITIES AND SHAREHOLDERS' EQUITY            2000         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>

     CURRENT LIABILITIES
         Accounts payable                              $  314,939   $  272,516
         Accrued expenses                                 153,254      147,633
         Accrued taxes payable                            154,720      181,329
         Current maturities of long-term debt              81,811       70,410
                                                       ----------   ----------

                         Total current liabilities        704,724      671,888


     LONG-TERM DEBT, less current maturities              734,531    1,015,734


     DEFERRED INCOME TAXES                                215,000      195,000

     COMMITMENTS AND CONTINGENCIES


     SHAREHOLDERS' EQUITY
         Common stock - $.01 par value;
           9,000,000 shares authorized; 1,253,631 and
           1,248,631 shares issued and outstanding
           in 2000 and 1999, respectively                  12,536       12,486
         Capital in excess of par value                 1,781,672    1,740,472
         Retained earnings                              1,167,121      663,199
                                                       ----------   ----------

                                                        2,961,329    2,416,157
                                                       ----------   ----------

                                                       $4,615,584   $4,298,779
                                                       ==========   ==========
</TABLE>







The accompanying notes are an integral part of these statements.


<PAGE>


                          Telebyte, Inc. and Subsidiary

                       CONSOLIDATED STATEMENTS OF EARNINGS

                             Year ended December 31,




<TABLE>
<CAPTION>
                                                          2000         1999
                                                       ----------   ----------
<S>                                                    <C>          <C>
     Net sales                                         $6,464,528   $5,778,388
     Cost of sales                                      3,155,494    2,748,875
                                                       ----------   ----------

              Gross profit                              3,309,034    3,029,513
                                                       ----------   ----------

     Operating expenses
         Selling, general and administrative            1,969,518    1,740,243
         Research and development                         537,236      518,096
                                                       ----------   ----------

                                                        2,506,754    2,258,339
                                                       ----------   ----------

              Operating profit                            802,280      771,174
                                                       ----------   ----------

     Other income (expense)
         Interest income                                   31,649        7,674
         Rental income                                     48,195       48,195
         Interest expense                                 (95,202)    (111,738)
                                                       ----------   ----------

                                                          (15,358)     (55,869)
                                                       ----------   ----------

              Earnings before income taxes                786,922      715,305

     Income tax provision                                 283,000      292,000
                                                       ----------   ----------

              NET EARNINGS                             $  503,922   $  423,305
                                                       ==========   ==========

     Earnings per common share:
         Basic                                         $     0.40   $      .34
                                                       ==========   ==========
         Diluted                                       $     0.32   $      .31
                                                       ==========   ==========

     Weighted average shares:
         Basic                                          1,252,713    1,262,159
                                                       ==========   ==========
         Diluted                                        1,578,648    1,349,348
                                                       ==========   ==========
</TABLE>






The accompanying notes are an integral part of these statements.


<PAGE>


                          Telebyte, Inc. and Subsidiary

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                     Years ended December 31, 2000 and 1999



<TABLE>
<CAPTION>
                                                      Number of                 Capital in
                                                       shares       Common       excess of      Retained    Treasury
                                                       issued        stock       par value      earnings      stock        Total
                                                     ----------    ---------    -----------    ----------   ---------    ----------
<S>                                                   <C>          <C>          <C>            <C>          <C>          <C>
Balance at January 1, 1999                            1,661,066    $  16,611    $ 2,760,921    $  239,894   $(101,093)   $2,916,333

Common stock issued upon exercise of options              5,000           50          3,900                                   3,950

Purchase of treasury stock                                                                                   (927,431)     (927,431)

Retirement of treasury stock                           (417,435)      (4,175)    (1,024,349)                1,028,524

Net earnings                                                                                      423,305                   423,305
                                                     ----------    ---------    -----------    ----------   ---------    ----------

Balance at December 31, 1999                          1,248,631       12,486      1,740,472       663,199        --       2,416,157

Common stock issued for purchase of intangibles           5,000           50         41,200                                  41,250

Net earnings                                                                                      503,922                   503,922
                                                     ----------    ---------    -----------    ----------   ---------    ----------

Balance at December 31, 2000                          1,253,631    $  12,536    $ 1,781,672    $1,167,121   $    --      $2,961,329
                                                     ==========    =========    ===========    ==========   =========    ==========
</TABLE>



The accompanying notes are an integral part of this statement.



<PAGE>


                          Telebyte, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,

<TABLE>
<CAPTION>
                                                            2000         1999
                                                         ---------    ---------
<S>                                                      <C>          <C>
Cash flows from operating activities
    Net earnings                                         $ 503,922    $ 423,305
    Adjustments to reconcile net earnings to net
       cash provided by operating activities
          Provision for bad debt expense                     1,351
          Depreciation and amortization                    307,620      232,333
          Deferred income taxes                            (38,000)     110,000
          Imputed interest                                   1,389
          Decrease (increase) in operating assets
              Accounts receivable                           80,898     (210,450)
              Inventories                                 (155,416)     (97,303)
              Prepaid expenses and other                   (44,931)      15,853
          (Decrease) increase in operating liabilities
              Accounts payable                              42,423      (79,493)
              Accrued expenses and taxes                   (20,988)     192,291
                                                         ---------    ---------

         Net cash provided by operating activities         678,268      586,536
                                                         ---------    ---------

Cash flows from investing activities
    Additions to property and equipment                   (214,326)    (167,844)
    Purchase of intangibles                               (110,000)
    Cost of non-compete agreement                                      (203,124)
                                                         ---------    ---------

         Net cash used in investing activities            (324,326)    (370,968)
                                                         ---------    ---------

Cash flows from financing activities
    Principal payments under mortgage obligation           (68,825)     (63,131)
    Net (payments) borrowings under line-of-credit
         agreement                                        (221,941)     221,941
    Purchase of treasury stock                                         (927,431)
    Proceeds from exercise of stock options                               3,950
                                                         ---------    ---------

         Net cash used in financing activities            (290,766)    (764,671)
                                                         ---------    ---------

         NET INCREASE (DECREASE) IN CASH
              AND CASH EQUIVALENTS                          63,176     (549,103)

Cash and cash equivalents at beginning of year             370,527      919,630
                                                         ---------    ---------

Cash and cash equivalents at end of year                 $ 433,703    $ 370,527
                                                         =========    =========

Non cash financing activities
     Issuance of common stock and note payable for
          purchase of intangibles                        $  60,825
</TABLE>




The accompanying notes are an integral part of these statements.


<PAGE>


                          Telebyte, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Telebyte, Inc. and Subsidiary (the "Company") designs, manufactures and
     markets electronic data communications products. The Company's products are
     primarily sold to end-users, domestic dealers and distributors, foreign
     dealers and distributors and original equipment manufacturers. Through the
     Company's wholly owned subsidiary, DeliverNextday.com,Inc. d/b/a
     Nextday.com ("Nextday.com") the Company, utilizing electronic commerce
     (e-commerce) via the Internet, resells products manufactured principally by
     other companies in the business to business marketplace. The Company
     currently operates in two business segments, data communications and
     e-commerce. The Company does not depend upon sales to a single customer or
     a limited group of customers and there were no sales to a single customer
     during the last two years exceeding 10% of net sales. The Company has no
     foreign operations. Export sales were $967,000 and $694,000 in 2000 and
     1999, respectively.

     A summary of the significant accounting policies consistently applied in
     the preparation of the accompanying consolidated financial statements
     follows:

     1.   Principles of Consolidation

          The accompanying consolidated financial statements include the
          accounts of Telebyte Inc. and its subsidiary, Nextday.com (formerly
          known as DeliverNextDay.com). All significant intercompany balances
          have been eliminated in consolidation.

     2.   Inventories

          Inventories are stated at the lower of cost (first-in, first-out) or
          market.

     3.   Property and Equipment

          Property and equipment are stated at cost, less accumulated
          depreciation. Depreciation is computed on the straight-line basis over
          the estimated useful lives of the assets, which are 35 years for
          building and improvements, 5 years for equipment and 2 years for
          software.



<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE A (continued)

     4.   Other Assets

          Other assets include the unamortized costs of certain intangible
          assets including a restrictive covenant, license agreement and
          deferred loan costs. Amortization is provided for on a straight-line
          basis over the shorter of the estimated useful lives or the related
          contractual life.

     5.   Income Taxes

          Deferred income taxes are recognized for temporary differences between
          financial statement and income tax bases of assets and liabilities for
          which income tax benefits are expected to be realized in future years.
          A valuation allowance is established to reduce the deferred tax assets
          if it is more likely than not that all, or some portion, of such
          deferred tax assets will not be realized. The effect on deferred taxes
          of a change in tax rates is recognized in income in the period that
          includes the enactment date.

     6.   Advertising

          Advertising costs are expensed as incurred and totaled $63,000 and
          $37,000 in 2000 and 1999, respectively.

     7.   Earnings Per Share

          Basic earnings per share is determined by dividing the Company's net
          earnings by the weighted average shares outstanding. Diluted earnings
          per share includes the dilutive effects of outstanding stock options.
          Excluded from the calculation of diluted earnings per share are 28,500
          and 9,500 options to purchase the Company's common stock in 2000 and
          1999, respectively, as their inclusion would have been anti-dilutive.

     8.   Stock-Based Compensation Plans

          The Company maintains three fixed stock option plans, as more fully
          described in Note G to the consolidated financial statements,
          accounted for using the "intrinsic value" method pursuant to the
          provisions of Accounting Principles Board Opinion No. 25, "Accounting
          for Stock Issued to Employees," and related Interpretations, and,
          accordingly, recognizes no compensation expense. Therefore, the
          Company has elected the disclosure provisions only of Statement of
          Financial Accounting Standards No. 123, "Accounting for Stock-Based
          Compensation."



<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE A (continued)

     9.   Statements of Cash Flows

          For purposes of the statements of cash flows, the Company considers
          highly liquid cash investments with an original maturity of three
          months or less to be cash equivalents. The Company paid interest of
          $94,313 and $90,579 and income taxes of $356,642 and $6,419 in 2000
          and 1999, respectively.

     10.  Revenue Recognition

          Revenue is recognized from sales when a product is shipped and title
          passes to customers. Service fees are recognized upon the completion
          of the related service.

     11.  Shipping and Handling Costs

          Pursuant to EITF 00-10, "Accounting for Shipping and Handling Fees and
          Costs," the Company includes fees billed to a customer relating to
          shipping and handling costs in net sales. All shipping and handling
          expenses incurred by the Company are included in cost of sales. Prior
          year amounts have been restated to conform to the current year
          presentation.

     12.  Use of Estimates and Fair Value of Financial Instruments

          In preparing financial statements in conformity with accounting
          principles generally accepted in the United States of America,
          management is required to make estimates and assumptions that affect
          the reported amounts of assets and liabilities and the disclosure of
          contingent assets and liabilities at the date of the financial
          statements and revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

          Management of the Company believes that the fair value of financial
          instruments, consisting of cash, accounts receivable and debt,
          approximate carrying value due to the immediate or short-term maturity
          associated with its cash and accounts receivable and the interest
          rates associated with its debt.



<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE A (continued)

     13.  Segment Reporting

          The Company adopted Statement of Financial Accounting Standards No.
          131 ("SFAS No. 131") "Disclosures About Segments of an Enterprise and
          Related Information," for the year ended December 31, 2000. SFAS No.
          131 requires that the Company disclose certain information about its
          business segments, defined as "components of an enterprise about which
          separate financial information is available that is evaluated
          regularly by the chief operating decision maker in deciding how to
          allocate resources and in assessing performance."


NOTE B - INVENTORIES

     Inventories consist of the following at December 31:

<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Purchased components and materials                   $  756,812       $  555,299
Work in process                                         369,213          347,596
Finished goods                                          548,668          616,382
                                                     ----------       ----------
                                                     $1,674,693       $1,519,277
                                                     ==========       ==========
</TABLE>


NOTE C - PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Land                                                 $  300,000       $  300,000
Building and improvements                             1,029,183        1,024,583
Equipment                                               689,494          685,859
Software                                                 89,763           77,563
                                                     ----------       ----------

                                                      2,108,440        2,088,005
Less accumulated depreciation                           922,030          963,422
                                                     ----------       ----------

                                                     $1,186,410       $1,124,583
                                                     ==========       ==========
</TABLE>





<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE D - DEBT

     1.   Line of Credit Facility

          The Company has an agreement with a financial institution, expiring
          April 30, 2001, which provides the Company with a line of credit
          facility of up to $500,000 based on eligible accounts receivable and
          purchased components and materials and finished goods inventories of
          the Company, as defined in the agreement. Further, the agreement
          contains certain financial covenants which require the Company to
          maintain a minimum level of tangible net worth and places limitations
          on the ratio of the Company's total debt to Company's tangible net
          worth, as defined in the agreement. Borrowings under the line of
          credit bear interest at the bank's specified prime rate plus .75%
          (10.25% at December 31, 2000). There was no outstanding balance
          against this line at December 31, 2000 and 1999.

          In January 1999, the Company secured an additional Reducing Revolving
          line of credit from this institution, which provides for initial
          borrowings up to a maximum of $1,000,000. Availability under the
          Reducing Revolving line of credit will be reduced monthly by
          approximately $11,900 and will expire January 2006. Availability under
          this line at December 31, 2000 was approximately $726,000. Borrowings
          under this loan agreement bear interest at the 30 Day Commercial Paper
          Rate plus 2.90%. (9.45% at December 31, 2000). There was no
          outstanding balance against this line at December 31, 2000.


     2.   Mortgage Note

          The Company's first mortgage note is collateralized by land and
          building. The remaining unpaid mortgage note balance at December 31,
          2000 is payable in equal monthly installments of $12,297 (inclusive of
          interest at 9.3%) with a maturity date of June 2008. On June 1, 2000
          the interest rate was increased to 9.3% in accordance with the terms
          of the mortgage modification agreement. At that time, and every three
          years thereafter, the interest rate will be adjusted to the three-year
          weekly average U.S. Treasury Constant Maturity Rate plus 3%.

          Financing and other costs aggregating $95,122 incurred in connection
          with the acquisition of real property and the refinancing of mortgage
          debt are stated at cost, net of accumulated amortization of $63,582
          and $58,402 at December 31, 2000 and 1999, respectively, and are
          included in "Other assets" in the accompanying balance sheets.
          Amortization is provided on a straight-line basis over the life of the
          mortgage note.



<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE D (continued)

Long-term debt is summarized as follows at December 31:


<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Reducing revolving line of credit                                     $  221,941
Domain name note payable in five annual
     installments of $5,000 beginning on
     March 8, 2001, net deferred
     interest of $4,036                              $   20,964
First mortgage note payable to bank in
     equal monthly installments, including
     interest, through June 2008                        795,378          864,203
                                                     ----------       ----------
                                                        816,342        1,086,144
Less current maturities                                  81,811           70,410
                                                     ----------       ----------

                                                     $  734,531       $1,015,734
                                                     ==========       ==========
</TABLE>


Aggregate maturities of long-term debt as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>

                            <S>                         <C>
                            2001                      $ 81,811
                            2002                        88,095
                            2003                        96,610
                            2004                       105,947
                            Thereafter                 443,879
                                                      --------
                                                      $816,342
                                                      ========
</TABLE>


NOTE E - EMPLOYEE BENEFIT PLANS

     The Company sponsors an employee investment savings 401(k) plan to which
     both the Company and employees contribute. All employees are eligible to
     participate; the Company contributes 50% of the first 2% deferred by the
     employee. Each employee may voluntarily contribute up to 15% of annual
     compensation, or the maximum allowed as determined by the Internal Revenue
     Code. Benefits are 100% vested and are payable upon the employee's death,
     disability, retirement, termination and under certain financial
     circumstances. Employer contributions of $8,485 and $6,564 were made to the
     plan in 2000 and 1999, respectively.



<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE E (continued)

     The Company maintains a deferred compensation agreement with a key officer,
     whereby the officer will receive a defined amount approximating 30% of his
     1990 base salary for a period of 10 years after reaching age 65. The
     deferred compensation plan is funded through life insurance and is being
     provided for currently. The expense charged to operations in 2000 and 1999
     for such future obligations was approximately $4,080 in each year.


NOTE F - INCOME TAXES

     The provision for income taxes is summarized as follows:


<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Current
    Federal                                          $  271,000       $  140,000
    State                                                50,000           42,000
                                                     ----------       ----------

                                                        321,000          182,000

Deferred tax (benefit) expense                          (38,000)         110,000
                                                     ----------       ----------

                                                     $  283,000       $  292,000
                                                     ==========       ==========
</TABLE>


     The actual income tax expense differs from the Federal statutory rate as
     follows:

<TABLE>
<CAPTION>
                                                                              2000                                1999
                                                                  -------------------------            ------------------------
                                                                    Amount               %              Amount              %
                                                                  ---------            ----            --------           ----
<S>                                                               <C>                  <C>             <C>                <C>
     Federal statutory rate                                       $ 267,500            34.0%           $243,000           34.0%
     State income taxes, net of
        Federal income tax benefit                                   33,000             4.2              39,000            5.4
     Officers' life insurance                                         2,000              .2               3,000             .4
     Adjustment of net operating loss
         carryforwards and other non-
         recurring items                                                                                 85,000           11.9
     Benefit of net operating loss
         carryforward and other credits                                                                 (78,000)         (10.9)
     Other permanent differences                                    (19,500)           (2.4)
                                                                  ---------            ----            --------           ----
                                                                  $ 283,000            36.0%           $292,000           40.8%
                                                                  =========            ====            ========           ====
</TABLE>




<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE F (continued)

     The tax effects of temporary differences which give rise to deferred tax
assets (liabilities) at December 31, 2000 and 1999, are summarized as follows:

<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Deferred tax assets
    Deferred compensation                            $   83,000       $   46,000
    Inventory valuation                                  71,000           67,000
    Allowance for doubtful accounts                      18,000            6,000
    Accrued expenses                                     21,000           16,000
                                                     ----------       ----------

          Gross deferred tax assets                     193,000          135,000

Deferred tax liabilities
    Excess tax over book depreciation
      and amortization                                 (215,000)        (195,000)
                                                     ----------       ----------


 Net deferred tax liability                          $  (22,000)      $  (60,000)
                                                     ==========       ==========
</TABLE>


NOTE G - STOCK OPTION PLANS

     In 1987, the Company adopted a plan which provided for the granting, to
     officers and key employees of the Company of incentive stock options, as
     defined in the Internal Revenue Code, for the purchase of a maximum of
     250,000 shares of the Company's common stock. Options to purchase 10,800
     shares are outstanding under this plan. Under the terms of the plan, the
     options, which expire ten years after grant, are exercisable at a price
     equal to the fair market value of the stock at the date of the grant. The
     options become exercisable in four annual installments, the first
     installment occurring within one year after the date of grant.

     In 1994, the Company adopted the 1993 Stock Option Plan (the "1993 Plan"),
     which provides for the granting to directors and key employees of the
     Company of incentive stock options and nonqualified stock options for the
     purchase of a maximum of 100,000 shares of the Company's common stock.
     Under the terms of the 1993 Plan, the options, which expire ten years after
     grant, are exercisable at a price equal to the fair market value of the
     stock at the date of the grant for incentive stock options and at prices
     determined by the Board of Directors for nonqualified stock options, and
     become exercisable in accordance with terms established at the time of the
     grant. At December 31, 2000, there were 16,050 shares available for grant
     under the 1993 Plan.


<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE G (continued)

     In 1999, the Company adopted the 1999 Stock Option Plan (the "1999 Plan"),
     which provides for the granting to employees, non-employee directors,
     consultants and advisors of the Company, of incentive stock options and
     nonqualified stock options for the purchase of a maximum of 500,000 shares
     of the Company's common stock. Under the terms of the 1999 Plan, the
     options, which expire ten years after grant, are exercisable at a price
     equal to the fair market value of the stock at the date of the grant for
     incentive stock options and at prices determined by the Board of Directors
     for nonqualified stock options, and become exercisable in accordance with
     terms established at the time of the grant. At December 31, 2000, there
     were 62,000 shares available for grant under the 1999 Plan.

     The following is a summary of activity with respect to stock options under
     the plans:

<TABLE>
<CAPTION>
                                                                                                           Weighted average
                                                                  Shares           Price per share         price per share
                                                                  ------           ---------------         ----------------
<S>                                                                <C>             <C>                           <C>
       Outstanding at January 1, 1999                              64,550           .3125 to 3.80                $2.08
           Granted                                                460,000          1.0300 to 1.28                 1.03
           Exercised                                               (5,000)          .79                            .79
           Expired                                                (34,250)          .6850 to 3.80                 2.29
                                                                  -------

       Outstanding at December 31, 1999                           485,300           .3125 to 3.80                 1.09
           Granted                                                 42,000          1.6250 to 2.875                2.21
           Expired                                                 (3,300)          .3125 to 1.28                 1.05
                                                                  -------

       Outstanding at December 31, 2000                           524,000           .90 to 3.80                   1.18
                                                                  =======

       Balance exercisable at December 31, 2000                   164,375           .90 to 3.80                   1.23
                                                                  =======
</TABLE>

     The following table summarizes significant ranges of outstanding and
     exercisable options at December 31, 2000:

<TABLE>
<CAPTION>
                                                    Options outstanding                          Options exercisable
                                    ------------------------------------------------      --------------------------
                                                          Weighted         Weighted                             Weighted
                                                           average          Average                              average
               Ranges of                                  remaining        Exercise                             exercise
            exercise prices             Shares          life in years        Price            Shares              price
            ---------------             ------          -------------      ---------          ------            -------
           <S>                         <C>                  <C>              <C>              <C>                 <C>
           $ .90 to $2.00              495,500              8.41             $ 1.06           157,000             $1.11
           $2.75 to $3.80               28,500              8.88               3.18             7,375              3.76
</TABLE>


     The weighted-average option fair value on the grant date was $1.77 and $.82
     for options issued during the years ended December 31, 2000 and 1999,
     respectively.


<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE G (continued)

     The Company has adopted the disclosure provisions of Statement of Financial
     Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
     ("SFAS No. 123"); it applies APB Opinion No. 25, "Accounting for Stock
     Issued to Employees," and related Interpretations in accounting for the
     Plans and does not recognize compensation expense for such Plans. If the
     Company had elected to recognize compensation expense based upon the fair
     value at the grant dates for awards under these plans consistent with the
     methodology prescribed by SFAS No. 123, the Company's reported net earnings
     and earnings per share would be reduced to the pro forma amount indicated
     below for the years ended December 31:

<TABLE>
<CAPTION>

                                                      2000             1999
                                                   ----------       ----------
<S>                                                <C>              <C>
Net earnings
    As reported                                    $503,922         $423,305
    Pro forma                                       384,228          381,724
Basic earnings per common share
    As reported                                        $.40             $.34
    Pro forma                                           .31              .30
Diluted earnings per common share
    As reported                                        $.32             $.31
    Pro forma                                           .24              .28
</TABLE>

     These pro forma amounts may not be representative of future disclosures
     because they do not take into effect pro forma compensation expense related
     to grants made before 1997. The fair value of these options was estimated
     at the date of grant using the Black-Scholes option-pricing model with the
     following weighted-average assumptions for the years ended December 31,
     2000 and 1999: expected volatility of 121%; risk-free interest rates
     ranging from 5.08% to 6.15% in 2000 and 4.86% to 4.98% in 1999. The
     expected lives of options issued are four years for 2000 and 1999.

     The Black-Scholes option valuation model was developed for use in
     estimating the fair value of traded options which have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the use of highly subjective assumptions including the
     expected stock price volatility. Because the Company's employee stock
     options have characteristics significantly different from those of traded
     options, and because changes in the subjective assumptions can materially
     affect the fair value estimate, in management's opinion, the existing
     models do not necessarily provide a reliable single measure of the fair
     value of its employee stock options.



<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE H - BUSINESS SEGMENTS

     The Company has two reportable segments: Telebyte is a manufacturer
     of technology products and Nextday.com distributes products through
     e-commerce.

     The Company's chief operating decision maker utilizes net sales and net
     earnings (loss) information in assessing performance and making overall
     operating decisions and resource allocations. The accounting policies of
     the operating segments are the same as those described in the summary of
     significant accounting policies. Information about the Company's segments
     for the years ended December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Net sales from external customers
    Telebyte                                         $6,213,225       $5,746,785
    Nextday.com                                         251,303           31,603
                                                     ----------       ----------

                                                     $6,464,528       $5,778,388
                                                     ==========       ==========

Intersegment net sales
    Telebyte                                         $  143,745       $   22,559
    Nextday.com                                            --               --
                                                     ----------       ----------

                                                     $  143,745       $   22,559
                                                     ==========       ==========

Operating profit (loss)
    Telebyte                                         $1,140,856       $  923,344
    Nextday.com                                       (338,576)        (152,170)
                                                     ----------       ----------

                                                     $  802,280       $  771,174
                                                     ==========       ==========

Interest expense
    Telebyte                                         $   95,202       $  111,738
    Nextday.com                                            --               --
                                                     ----------       ----------

                                                     $   95,202       $  111,738
                                                     ==========       ==========
</TABLE>




<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE H (continued)

<TABLE>
<CAPTION>

                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Other income
    Telebyte                                         $   77,239       $   55,540
    Nextday.com                                           2,605              329
                                                     ----------       ----------

                                                     $   79,844       $   55,869
                                                     ==========       ==========

Income tax provision (benefit)
    Telebyte                                         $  404,000       $  354,000
    Nextday.com                                        (121,000)         (62,000)
                                                     ----------       ----------

                                                     $  283,000       $  292,000
                                                     ==========       ==========

Identifiable assets
    Telebyte                                         $4,471,001       $4,099,014
    Nextday.com                                         144,583          199,765
                                                     ----------       ----------

                                                     $4,615,584       $4,298,779
                                                     ==========       ==========

Capital expenditures
    Telebyte                                         $  198,153       $   79,185
    Nextday.com                                          16,173           88,659
                                                     ----------       ----------

                                                     $  214,326       $  167,844
                                                     ==========       ==========

Depreciation and amortization
    Telebyte                                         $  218,382       $  220,390
    Nextday.com                                          89,238           11,943
                                                     ----------       ----------

                                                     $  307,620       $  232,333
                                                     ==========       ==========
</TABLE>


NOTE I - COMMITMENTS AND CONTINGENCIES

     Former Chairman

     Effective January 20, 1999, then Chairman of the Board, President and Chief
     Executive Officer of the Company (the "Former Chairman") resigned his
     positions with the Company. However, the Former



<PAGE>


                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE I (continued)

     Chairman will serve as a consultant to the Company through January 19, 2002
     for an aggregate consideration of $165,000 plus reimbursement for certain
     expenses. During 1999, the Former Chairman was paid $85,000 for consulting
     services and will earn $80,000 for future services through January 2002. In
     addition, the Company purchased all of the shares of common stock of the
     Company owned by the Former Chairman (262,835 shares) and the Former
     Chairman agreed to cancel options to purchase 10,000 shares of common stock
     of the Company for an aggregate cost (including related legal and
     professional fees of approximately $74,000) of $1,149,456, of which
     $927,431 was for such shares, $18,901 was for the cancellation of such
     options and $203,124 was for the Former Chairman's restrictive covenant. In
     addition, the Former Chairman has agreed not to compete with the business
     of the Company until January 19, 2003 and has released the Company from
     certain potential claims relative to his previous employment. Further, the
     Company transferred a life insurance policy maintained under the Company's
     deferred compensation plan, to the Former Chairman, having a cash value of
     approximately $80,000.

     In December 1999, the Company received information indicating that the
     Former Chairman had breached certain of the non-competition provisions of
     the consulting agreement entered into by the Former Chairman and the
     Company and also of the stock purchase agreement and the termination
     agreement entered into by the Former Chairman and the Company. In response
     to this information, the Company asserted its rights under the consulting
     agreement and cancelled it for cause on January 12, 2000, and ceased making
     payments thereunder. The Company is considering what further legal action
     it may take with respect to this situation as warranted under the
     circumstances.

     Lease Commitments

     The Company leases office space and certain equipment used in its
     operations pursuant to noncancellable operating leases expiring through
     August 2003. Rental expense for office space and such equipment was $17,453
     and $10,218 in 2000 and 1999, respectively. The minimum rental commitments
     under these noncancellable operating leases, at December 31, 2000, are
     summarized as follows:


<TABLE>
<CAPTION>

                        <S>                      <C>
                        2001                     $  52,765
                        2002                        52,718
                        2003                        43,166
                                                  --------

                                                  $148,649
                                                  ========
</TABLE>




<PAGE>



                          Telebyte, Inc. and Subsidiary

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                           December 31, 2000 and 1999



NOTE I (continued)

Employment Contracts

     The Company has employment contracts with various officers with remaining
     terms of approximately three years at amounts approximating their current
     levels of compensation. The Company's remaining aggregate commitment at
     December 31, 2000 under such contracts is approximately $727,000.


NOTE J - EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
     earnings per share:

<TABLE>
<CAPTION>
                                                             December 31,
                                                     ---------------------------
                                                        2000             1999
                                                     ----------       ----------
<S>                                                  <C>              <C>
Numerator
         Net income                                  $  503,922       $  423,305
                                                     ==========       ==========

Denominator
    Denominator for basic earnings per share
       (weighted-average shares)                      1,252,713        1,262,159
                                                                      ==========
    Effect of dilutive securities
      (employee stock options)                          325,935           87,189
                                                     ----------       ----------
    Denominator for diluted earnings per share
      (adjusted weighted-average shares and
      assumed conversions)                            1,578,648        1,349,348
                                                     ==========       ==========
Basic earnings per share                             $      .40       $      .34
                                                     ==========       ==========
Diluted earnings per share                           $      .32       $      .31
                                                     ==========       ==========
</TABLE>